Why Allegheny Technologies, USG, and Craft Brew Alliance Jumped Today

By Markets Fool.com


Image source: Craft Brew Alliance.

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Monday got the week off on a positive note for the stock market, which bounced back from its poor performance last week. Investors who had focused on comments from Fed Chair Janet Yellen suggesting that the central bank might be faster to tighten monetary policy than previously expected took solace today from new economic data showing little or no inflationary pressure. Because one reason for increasing short-term interest rates is to prevent an acceleration in inflation, the weak reading supports the argument that rate hikes won't be necessary in the short term. That was enough to send the Dow up more than 100 points and other major market benchmarks higher by a quarter-percent to a half-percent. Some stocks did even better, and Allegheny Technologies (NYSE: ATI), USG (NYSE: USG), and Craft Brew Alliance (NASDAQ: BREW) were among the best performers in the market on Monday.

Allegheny gets a ratings bump

Allegheny Technologies climbed higher by 11% after the steelmaker received positive comments from analysts at Deutsche Bank. The analyst company boosted its rating on Allegheny from hold to buy and increased its price target by a third to $20 per share. The analysts believe that Allegheny's move to close some of its weaker-performing locations could help the company consolidate its balance sheet more effectively, reducing overall debt exposure and making it easier to sustain performance through a tough part of the business cycle for the steel industry. Allegheny has many more challenges to overcome before it can declare final victory, but cost-cutting measures have been a necessary step for the company to try to work its way back toward sustainable profitability.

USG makes a big move

Materials supplier USG climbed 7% after the company said that it would sell its L&W Supply distribution business to ABC Supply for $670 million in cash. The companies expect the deal to go through by the end of 2016, and USG CEO James Metcalf argued that the move is "transformative for USG, enabling us to right-size our balance sheet and accelerate profitable growth." In particular, USG believes that it will be able to use some of the cash to reduce debt while investing some of the proceeds back into its gypsum and ceilings businesses. In the longer-term, USG might also move forward with shareholder-friendly moves like stock buybacks or dividend payments. Given the strength of the core construction market in the U.S., USG is in a good position to use its newfound cash to profitable use.

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Craft Brew celebrates its alliance

Finally, Craft Brew Alliance gained another 7%. The beer-maker has done extremely well in recent days, posting gains of nearly 50% since last Tuesday's announcement that Anheuser-Busch InBev (NYSE: BUD) would partner with the company to expand its distribution and cement the position of craft brand Kona Brewing both domestically and internationally. As Craft Brew Alliance CEO Andy Thomas said, it has recently become "clear that our strategic focus and commitment to the growth of craft beer were increasingly aligned, and we started to explore ways to collaborate more closely." Given the big developments in the global beer industry, the potential from craft beers is worth investors' attention.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Anheuser-Busch InBev NV. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.