Tariff - related uncertainty

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Will TAT Technologies Overcome Its MRO Softness and Shine Again?
ZACKS· 2025-09-04 16:46
Core Insights - Increasing investments from global airlines in MRO services for aging fleets are driving growth for TAT Technologies Ltd. (TATT) [1] - Rising defense budgets are also contributing to the demand for military jet production and modernization, benefiting TATT [1] MRO Business Performance - In Q1 2025, TATT faced softer demand in its MRO business due to supply-chain challenges and order timing, leading to moderate MRO intake in Q2 [2] - Ongoing tariff-related uncertainties are expected to further pressure TATT's MRO business in the near term, with the CEO indicating potential quarter-to-quarter volatility [3] Recovery and Contracts - Since July 2025, TATT's MRO intake has begun to recover, supported by recent contract wins, which may lead to revenue increases by late 2025 or early 2026 [4] - In August 2025, TATT secured a $12 million contract for MRO services on Boeing 777 aircraft and signed an agreement with a global cargo carrier to extend APU repair work [5] Industry Trends - Other aerospace and defense companies, such as RTX Corporation and Boeing, are also expanding their MRO capabilities to meet rising global demand [6] - RTX's Pratt & Whitney unit announced a partnership to enhance its global MRO footprint, while Boeing has opened new distribution centers to support aviation maintenance [7] Stock Performance and Valuation - TATT shares have increased by 110.4% over the past year, outperforming the industry average growth of 35.5% [8] - The company's shares are trading at a forward Price/Sales ratio of 2.16X, significantly lower than the industry's average of 10.05X [10] - The Zacks Consensus Estimate for TATT's near-term earnings has improved over the past 60 days [11]
Howmet Faces Softness in Commercial Transportation Market: Recovery Ahead?
ZACKS· 2025-08-28 15:21
Group 1: Company Performance - Howmet Aerospace Inc. (HWM) is experiencing ongoing weakness in its commercial transportation market, with revenues declining 4% year-over-year in Q2 2025, following a 14% drop in Q1 2025 [1][7] - The decline in revenue is attributed to softer OEM builds, particularly in the Forged Wheels segment, and lower commercial truck builds due to tariff-related and economic uncertainties in North America [1][7] - The company's cost of goods sold (COGS) increased by 7.3% in 2024 and 3% in the first half of 2025, driven by rising aluminum prices and supply-chain volatility [2][7] Group 2: Market Dynamics - Despite challenges in the commercial transportation sector, solid momentum in the commercial and defense aerospace markets is supporting HWM's performance, with robust orders for engine spares for the F-35 program and aerospace fastening systems [3] - Supply-chain volatility and tariff-related headwinds are expected to continue impacting HWM's delivery of finished products and operational costs [2] Group 3: Competitive Landscape - HWM's peer, Kennametal Inc. (KMT), is also facing softness in its Metal Cutting segment, with organic revenues decreasing 4% year-over-year in Q4 of fiscal 2025 due to reduced demand in the transportation end market [4] - GE Aerospace is experiencing strong demand for its engines and services, supported by increasing air traffic and fleet renewal activities, indicating a contrasting performance in the aerospace sector [5] Group 4: Valuation and Estimates - HWM's shares have surged 34% over the past six months, outperforming the industry's growth of 20.5% [6] - The company is currently trading at a forward price-to-earnings ratio of 43.51X, which is above the industry average of 28.19X, and carries a Value Score of D [9] - The Zacks Consensus Estimate for HWM's earnings has been on the rise over the past 60 days, indicating positive sentiment among analysts [10]
Ampco-Pittsburgh Stock Down Following Weak Q2 Earnings
ZACKS· 2025-08-18 19:31
Core Viewpoint - Ampco-Pittsburgh Corporation experienced a significant decline in stock performance following its earnings report, with a net loss attributed to restructuring costs and tariff-related uncertainties impacting order intake and production [1][9]. Financial Performance - For Q2 2025, Ampco-Pittsburgh reported net sales of $113.1 million, a 1.9% increase from $110.9 million year-over-year, driven by growth in forged engineered products and favorable foreign currency translation [2]. - The company posted a net loss of $7.3 million, or $0.36 per share, compared to a net income of $2 million, or $0.10 per share, in the prior year, primarily due to a $6.8 million charge related to the closure of its U.K. cast roll operations [2]. - Adjusted EBITDA for the quarter was $7.9 million, down 21.2% from $10.1 million, with margins contracting to 7.1% from 9.1% [3]. Segment Performance - The Forged and Cast Engineered Products segment generated $77.9 million in revenues, up 2.9% from $75.7 million, although margins were negatively impacted by lower forged roll demand [4]. - The Air and Liquid Processing (ALP) segment reported revenues of $35.2 million, a slight decrease of 0.2% from $35.3 million, but improved profitability was noted due to a stronger product mix and demand from nuclear and military markets [4]. Cost and Expense Analysis - Costs of products sold increased by 4.9% to $91.9 million from $87.7 million, driven by higher manufacturing costs and lower production rates [5]. - Selling and administrative expenses decreased by 4.3% to $12.9 million from $13.6 million, while depreciation rose due to accelerated write-downs associated with the U.K. plant closure [5]. Management Insights - CEO Brett McBrayer highlighted that tariff-related volatility significantly affected order intake and production, with customers in the roll market pausing orders due to uncertainty over U.S. tariff levels [7]. - CFO Michael McAuley noted that the restructuring charge masked underlying progress, particularly in the ALP segment, which achieved its highest year-to-date adjusted EBITDA [8]. Future Outlook - Management indicated an improved operating environment for 2026, citing tariff clarity and the benefits of restructuring, with expectations of at least a $5 million uplift to annual operating income post-U.K. exit [11]. - The decision to exit the U.K. cast roll business is projected to reduce revenue by approximately $20 million to $25 million annually, with plans to reallocate production to Sweden [12].