AP Upgraded to Outperform on Exits, Tariff Pass-Through & ALP

Core Viewpoint - Ampco-Pittsburgh Corporation is transitioning from a multi-year reset with a streamlined business model, improved pricing discipline, and increased exposure to resilient end markets, leading to a fundamentally enhanced earnings base [1] Group 1: Business Strategy and Operations - The company has exited unprofitable operations, including the U.K. cast roll facility and a small steel distribution operation, which has improved its earnings outlook by eliminating recurring losses [4][5] - Management has successfully passed tariff-related costs to customers in the Forged and Cast Engineered Products segment, preserving margins despite trade policy uncertainties [2][3] - The Air and Liquid Processing (ALP) segment is benefiting from strong demand in pharmaceuticals, nuclear infrastructure, and defense, providing a more stable revenue mix [6][7] Group 2: Financial Performance and Valuation - Despite operational improvements, Ampco-Pittsburgh's stock valuation remains low compared to peers, trading at a fraction of peer multiples on sales and book value [9][10] - Pro-forma earnings indicate potential for significant growth in adjusted EBITDA as cost savings from exited businesses materialize and ALP performance strengthens [10] - The market has not yet fully recognized the durability of Ampco-Pittsburgh's reshaped portfolio, as valuation metrics have remained near historical lows [9][14] Group 3: Market Dynamics and Future Outlook - The company is positioned to deliver steadier earnings with reduced downside volatility, supported by a focused operating base and strong end-market demand [13][14] - The ALP segment's focus on engineered products tied to long-term investment cycles enhances the company's strategic direction and growth visibility [6][13]