J.P. Morgan Upgrades Allegheny Tech to Overweight (ATI)

J.P. Morgan is out with a research report this morning, where it upgrades shares of Allegheny Technologies ATI to Overweight, from Neutral; it has a $58.00 price target on the stock. The JPM analysts noted that, since early November, negative aerospace headlines and nickel price weakness impacted the aerospace-centric specialty alloy producers, pushing ATI's stock down 13% from $55.92. Yesterday, ATI announced an attractive acquisition of Ladish, an aerospace and industrial component fabricator and ATI customer. The analysts noted that the combination of ATI's recent underperformance, further integration in an already strong end market, and other organic growth opportunities yields an attractive entry point. As for valuation, the analysts remarked, “Our December 2011 PT is based on our increased 2011E EBITDA estimate, which includes our preliminary estimate for Ladish as well as modest upward revisions to the outlook of ATI's core business. We also account for the increased share count and debt level needed to complete this transaction. Our target multiple moves modestly higher to 9.2x from 8.4x, above the stock's ~7.4x average forward multiple since 2005, as we believe further integration in attractive end markets should warrant a higher valuation over time.”