The stock price of Atkore (NYSE: ATKR), a manufacturer of electrical safety products, increased by 5% on Friday, November 22, following the release of its fourth-quarter results. Although these results were mixed, the company’s disappointing outlook for fiscal 2025 initially pushed the stock down to its 52-week low of $76. However, on Friday, the stock recovered some ground. Despite analysts slashing price targets after the fourth quarter, many forecasts still remain above $90, providing support for the stock price. Over a longer period, ATKR has dropped 20% from approximately $113 in early 2023 to its current price of $90. This decline is largely due to:
- a 18% decrease in revenue, falling from $3.9 billion in 2022 to $3.2 billion in 2024;
- a 19% drop in the price-to-sales ratio, now at 1.0x compared to 1.3x previously; partially balanced by
- a 17% reduction in total shares outstanding to 37 million, which is attributed to the $1.4 billion spent on share repurchases.
1. Reasons for Atkore’s Revenue Drop
Atkore’s recent revenue decline stems from lower selling prices, even as volume sales have started to grow. The average selling prices fell sharply, declining by 16.5% in 2023 and 11.5% in 2024. The company’s performance is closely tied to commodity prices, especially steel, copper, and resin. A slump in raw material prices over the last few years has negatively impacted Atkore’s average selling price. Steel prices, in particular, have been decreasing since 2021 due to weaker demand from China. This lower price realization has also hurt Atkore’s profitability, with operating income halving from $1.2 billion in 2022 to $0.6 billion in 2024. Consequently, the operating margin has decreased from 31.5% to 19.5% during this timeframe.
For the latest quarter, Atkore reported sales of $788 million, marking a 9% year-over-year decline but surpassing the consensus estimate of $748 million. Breaking it down by segments, Electrical sales saw a 13.1% decrease, while Safety & Infrastructure sales increased by 2%, driven by improved volumes.
Looking ahead, Atkore has projected its sales to range between $2.9 billion and $3.2 billion for fiscal 2025, indicating ongoing pricing challenges.
2. Evaluating Growth Potential for ATKR Stock
ATKR stock has experienced a significant 43% decline this year, significantly lagging behind broader market performance, with the S&P 500 index rising by 25%. Yet, ATKR has outperformed the market over the past three years, earning returns of 170% in 2021, a modest 2% in 2022, and 41% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio—comprised of 30 stocks—has consistently outperformed the S&P 500 during the same period. This portfolio has demonstrated superior returns with lower volatility, providing a more stable investment option.
Given the current uncertainties related to macroeconomic trends, including interest rate cuts and declining steel prices, could ATKR witness a robust recovery? After its recent drop, there appears to be potential for growth in ATKR stock. Priced at $90, it is trading at 1.0x its trailing revenues, compared to its three-year average P/S ratio of 1.6x. While a slight decrease in valuation appears reasonable due to falling sales, the company boasts a solid cash position of $3.5 billion against less than $1 billion in debt. With a debt-to-equity ratio of 30% and 12% of assets held in cash, Atkore has also prioritized share repurchases, which have recently enhanced profitability—a trend expected to persist. Analysts anticipate a rebound in steel prices by 2026, which should support an improvement in average selling prices for the company. The average price estimate for ATKR stock set by analysts indicates a potential upside of approximately 12% from current levels, at $101.
While ATKR stock shows growth prospects, valuable comparisons with peers across the industry are available in the Peer Comparisons.
| Returns | Nov 2024 MTD [1] |
2024 YTD [1] |
2017-24 Total [2] |
| ATKR Return | 5% | -43% | 281% |
| S&P 500 Return | 4% | 25% | 166% |
| Trefis Reinforced Value Portfolio | 8% | 24% | 818% |
[1] Returns as of 11/25/2024
[2] Cumulative total returns since the end of 2016
Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
