Atkore Inc. (NYSE:ATKR) is a leading manufacturer of electrical products primarily for the non-residential construction and renovation markets, as well as safety and infrastructure solutions for the construction and industrial markets. The company has a strong track record of financial performance, delivering impressive results in recent years.

Financials

In fiscal year 2023, Atkore reported annual net income of $689,899,000 and annual revenue of $3,518,761,000. The company also generated robust annual operating cash flow of $807,634,000 and free cash flow of $588,746,000. These strong financial metrics demonstrate Atkore's ability to consistently generate substantial cash flow and profitability.

Looking at the company's quarterly performance, Atkore reported net sales of $792.9 million in the second quarter of fiscal year 2024, down 11.5% year-over-year. This decline was primarily attributed to a 9.5% decrease in average selling prices and a 1.2% impact from the economic value of solar energy tax credits to be transferred to certain customers. Sales volume also decreased by 0.8% during the quarter.

Despite the top-line challenges, Atkore's adjusted EBITDA for the second quarter was $212 million, representing a strong margin of over 26%. The company's adjusted EBITDA margin was in line with the first quarter's performance, demonstrating its ability to maintain profitability even in the face of market headwinds.

On a year-to-date basis, Atkore's sales volume increased 6% compared to the prior year, with contributions across the portfolio. The company's Electrical segment achieved a 33% adjusted EBITDA margin in the second quarter, while the Safety & Infrastructure segment's adjusted EBITDA margin rebounded to over 12%.

Recent Developments

Atkore's management team has been proactive in navigating the current market environment. The company is executing on its balanced capital deployment strategy, having repurchased over $150 million in shares during the first half of fiscal year 2024. Atkore also recently paid its first quarterly dividend, reflecting its commitment to returning capital to shareholders.

Outlook

Looking ahead, Atkore has updated its fiscal year 2024 outlook. The company now expects net sales to be slightly lower than its previous guidance due to continued challenges in the HDPE market and the delayed ramp-up of its solar torque tube facility. As a result, Atkore has reduced its adjusted EBITDA outlook by $50 million to a midpoint of $875 million.

Despite these near-term headwinds, Atkore remains confident in its long-term growth prospects. The company believes its diversified product portfolio and exposure to the energy transition and digital infrastructure expansion will continue to drive value creation. Atkore expects to deliver $18 in adjusted EPS in fiscal year 2025, up from the revised $16.50 midpoint for fiscal year 2024.

Business Overview

Atkore's business model is underpinned by strong secular trends in the electrical and infrastructure markets. The company's Electrical segment serves the growing demand for electrical power systems, while the Safety & Infrastructure segment provides solutions for the protection and reliability of critical infrastructure. These market dynamics, combined with Atkore's operational excellence and disciplined capital allocation, position the company well for long-term success.

In terms of geographic diversification, Atkore generates the majority of its revenue from the United States, which accounted for 88.5% of total net sales in the second quarter of fiscal year 2024. The company also has a presence in other regions, including Other Americas (3.0%), Europe (7.3%), and Asia-Pacific (1.3%).

Atkore's product portfolio is well-diversified, with the Electrical segment contributing 74.5% of total net sales in the second quarter. Within the Electrical segment, the company's top product categories include Metal Electrical Conduit and Fittings (18.6% of total net sales), Electrical Cable & Flexible Conduit (14.5%), and Plastic Pipe and Conduit (29.4%). The Safety & Infrastructure segment accounted for the remaining 25.5% of net sales, with Mechanical Pipe (11.2%) and Other Safety & Infrastructure products (14.3%) as the key contributors.

Liquidity

In terms of liquidity, Atkore maintains a strong balance sheet, with $368.1 million in cash and cash equivalents as of March 29, 2024. The company has access to a $325 million asset-based credit facility, of which $322.4 million was available as of the end of the second quarter. Atkore's robust cash flow generation and financial flexibility provide the company with the resources to invest in growth initiatives, pursue strategic acquisitions, and return capital to shareholders.

Looking ahead, Atkore's management team remains focused on executing its strategic priorities, which include driving organic growth, expanding its product portfolio, and pursuing accretive acquisitions. The company's exposure to the energy transition and digital infrastructure expansion, coupled with its operational excellence and disciplined capital allocation, position Atkore for continued success in the years to come.

Conclusion

Overall, Atkore's strong financial performance, diversified business model, and compelling growth prospects make it an attractive investment opportunity in the electrical and infrastructure markets. The company's ability to navigate market challenges and deliver consistent profitability underscores its resilience and long-term value creation potential.