Conditions are still “choppy” in a lot of key alloy end-markets, especially aerospace, but looking at the results of companies like Acerinox (OTCPK:ANIOY), Allegheny (ATI), and Carpenter (CRS), not to mention commentary from a host of multi-industrials this quarter, it looks like the bottom is in for alloy demand and the recovery is already underway. That’s great news for Universal Stainless & Alloy Products (USAP) (“Universal”), and the 71% sequential increase in the backlog (about 2.6x this quarter’s sales) should likewise build some confidence in improving order trends.
I highlighted Universal as a way to trade a broad recovery in alloys across a range of end-markets back in late March, and the shares are up about 20% since then – not a bad return, but also not all that I think these shares can do as aircraft suppliers start ordering again and as participants in other end-markets try to deliver on their swelling order books.
With the bottom in, I think there’s a credible case for Universal trading up into the mid-teens, if not higher, before the end of 2021. I want to reiterate, though, that this is not a long-term commitment. Universal has a dreadful long-term history of value-creation for shareholders, so it’s really only suitable as a vehicle for trading the demand cycles for stainless steel and specialty alloys.
Read the full article here:
Universal Stainless & Alloy Products Still Offers Significant Leverage To Improving Alloy Demand
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