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Allegheny Technologies continues stock market fall

| Monday, Oct. 7, 2002

An economy that has had as much problem recovering as a college student the day after an all night fraternity party has sent Allegheny Technologies stocks on a downward spiral.

On Thursday the stocks were at $6.91, and on Friday the stocks closed at $6.84 per share.

The stock's high this year was $19.10, and it has dipped to as low as $6.20.

Allegheny Technologies stock started the year at $16.75, was at $17.74 in mid-May and was at $12.24 in mid-July. Two weeks later, though, it had dipped below $10 to $9.51 and has trickled downward since.

Allegheny Technologies is the parent company of the Valley's largest employer, Allegheny Ludlum. The company employs about 4,000 people at its plants in the Valley.

Although Allegheny Technologies stocks showed a one-day improvement, analysts warn that investors shouldn't expect the company's stock to see a gradual increase until the economy recovers.

"This is the way it's going to be for the next few months, anyway," said Lloyd O'Carroll, first vice president of the financial advisory group BB&T Capital Markets, which is headquartered in Richmond, Va. "To get back to the teens (in stock price) and higher, we're going to need a better economy."

But he also said he doesn't expect the stock to dip much lower than what it is trading at now.

"It's selling significantly below value right now," O'Carroll said. "I don't see much down side from here."

Mark Parr, managing director at McDonald Research, a Cleveland-based investment research firm, said in a poor economy the steel industry usually suffers more than other industries, but he said when the economy turns around the industry has traditionally seen a strong recovery.

Both analysts said one of the major factors contributing to the problems of the stainless steel industry is the decline of the airline industry after the Sept. 11. attacks.

"The metal they use, including nickel and cobalt alloys all are used in jet engines," O'Carroll said. But because travel has declined, so has the airline company's demand for specialty steel products, he said.

Parr also said Allegheny Technologies has been hurt by one of its major competitors, North American Stainless, an expanding company located in Ghent, Ky.

The company opened its melt shop in early February and, according to its Web site it, has the capacity to melt 800,000 tons of stainless steel annually, as well as finish 1.3 million tons per year.

Parr said because of the company's state-of -the art technology and small, young nonunion work force, it can operate at a much lower cost than Ludlum.

Still, O'Carroll said Allegheny Technologies is in better shape than one of its competitors, Carpenter Technologies Corp., which is located near Reading.

On Monday it laid of 10 percent of its work force, what amounts to 500 people. The company produces specialty materials, including more than 22,000 stainless steel and specialty metal products.

Allegheny Ludlum Spokesman Dan Greenfield said Carpenter is not in direct competition with the Ludlum portion Allegheny Technologies.

He also said the company has no immediate plans for further layoffs. Earlier this year the company cut about 250 middle management positions.

Greenfield said there's no way he can predict the movement of the company's stock, but he said he was happy to see Tuesday's 60-cent gain.

"It's a nice little move today," he said.

O'Carroll said of Allegheny Technologies, "First you have to survive and their survival is fine."

But he said in order for the company to stay competitive during tough economic times, it needs to find ways to cut costs.

Comparison


Here is how the stock has fared on certain days during 2002, and how the Dow Jones closed.

  • Jan. 1: $16.40; Dow Jones -115.49
  • March 1: $15.61; DownJones-21.45
  • June 1: $17.45; Down Jones +17.25.
  • Oct. 1: $6.92; Dow Jones -109.52
  • Oct. 4: $6.84; Dow Jones-38.42

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