The stock price of Atkore (NYSE: ATKR), an electrical safety products’ manufacturer, rose 5% on Friday, November 22. The company reported mixed results for the fourth quarter on November 21 while its outlook for fiscal 2025 was dismal. This resulted in ATKR stock declining to its 52-week low of $76, before seeing a rebound on Friday. Despite cut in price targets post Q4, most of the analysts’ forecasts were still placed above $90 levels, aiding the stock price. Also see: What’s Behind Gap’s Stock Price Jump? Looking at a slightly longer term, ATKR stock has seen a decline of 20% from levels of around $113 in early 2023 to $90 now. This can primarily be attributed to:
- an 18% fall in the company’s revenue from $3.9 billion in 2022 to $3.2 billion in 2024; and
- a 19% fall in the company’s P/S ratio to 1.0x now, versus 1.3x then; partly offset by
- a 17% fall in total shares outstanding to 37 million, thanks to $1.4 billion the company spent on share repurchases.
1. What’s Behind Atkore’s Sales Decline?
Atkore’s revenue decline lately can be attributed to lower price realization, while its volumes have been trending higher. The average selling prices plunged 16.5% in 2023 and 11.5% in 2024. The company’s performance is linked to commodity prices, primarily steel, copper and resin. With a decline in raw material prices over recent years, the average selling price for Atkore has taken a hit. Steel prices have been on a decline since 2021, amid a weak China demand. Lower price realization has also weighed on Atkore’s profitability. Its operating income has halved, from $1.2 billion in 2022 to $0.6 billion in 2024. The operating margin has declined from 31.5% to 19.5% over this period.
Looking at the latest quarter, Atkore reported sales of $788 million, reflecting a 9% y-o-y decline, but above the consensus estimate of $748 million. Looking at segments, Electrical sales declined 13.1%, while Safety & Infrastructure sales were up 2%, driven by better volumes.
Atkore guided for its sales to be in the range of $2.9 billion and $3.2 billion in fiscal 2025, reflecting continued pricing pressure.
2. Does ATKR Stock Offer Any Room For Growth?
ATKR stock has seen a sharp 43% fall this year, significantly underperforming the broader markets, with the S&P500 index rising 25%. Admirably, ATKR stock has generated better returns than the broader market in each of the last three years. Returns for the stock were 170% in 2021, 2% in 2022, and 41% in 2023. Similarly, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has outperformed the S&P 500 each yearover the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and falling steel prices, could ATKR see a strong jump? After its recent fall, we think ATKR stock has some room for growth. At levels of $90, it’s trading at 1.0x trailing revenues, versus the stock’s average P/S ratio of 1.6x over the last three years. Now, a slight decline in valuation multiple seems justified, given the falling sales. However, the company has a large cash position of $3.5 billion, while its debt is less than $1 billion. It has a debt to equity ratio of 30%, and 12% cash as a percentage of assets. Atkore has been using its cash for share repurchases, which has bolstered its bottom line lately, a trend expected to continue. With steel prices expected to rebound from 2026, the company’s average selling prices will likely improve. The $101 average of analysts price estimate for ATKR stock reflects around 12% upside from the current levels.
While ATKR stock looks like it has some room for growth, it is helpful to see valuable comparisons for companies across industries at Peer Comparisons.
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