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We came across a bullish thesis on Atkore Inc. (ATKR) on Substack by Elliot. In this article, we will summarize the bulls’ thesis on ATKR. Atkore Inc. (ATKR)'s stock was trading at $94.18 as of Dec 2nd. ATKR’s trailing and forward P/E were 7.42 and 11.07 respectively according to Yahoo Finance.
A worker on a ladder, repairing the electrical power transmission lines.
Atkore’s recent earnings report has brought to light significant challenges, altering its narrative from that of an industry leader poised for growth to a company contending with competitive pressures and pricing normalization. Initially, the investment thesis centered on Atkore’s strong position in electrical raceways, its exposure to megatrends such as renewable energy and data center expansion, and a management team with a proven track record in capital allocation. However, the latest financial results painted a more difficult picture. Net sales fell 9.4% year-over-year to $788.3 million, driven by a 12% decline in average selling prices, partially offset by 3% volume growth. Adjusted EBITDA dropped 39.6% to $140.2 million, reflecting pricing headwinds and earlier operational challenges. Moreover, the company reduced its FY25 guidance, forecasting revenue of $2.9–$3.2 billion and adjusted EBITDA of $475–$525 million, with EBITDA margins expected to decline further to approximately 16.4%, down from 24.1%.
The increasingly competitive landscape poses a significant concern for Atkore. In the PVC market, new capacity additions and rising imports from Colombia and the Dominican Republic are placing downward pressure on prices. Similarly, in the steel conduit business, the influx of cheaper imports continues to erode margins. These dynamics have raised questions about the sustainability of Atkore’s elevated margins achieved during the pandemic. While potential government tariffs on steel imports could provide some relief, management has indicated that any impact from such measures would likely be felt in late FY25 or FY26, underscoring the uncertainty surrounding regulatory intervention as a catalyst for margin recovery.
Despite these challenges, Atkore’s exposure to long-term growth trends like electrification, renewable energy, and infrastructure investment remains a key strength. These sectors are expected to drive sustained demand for the company’s products over the next decade. Additionally, Atkore has taken steps to address operational inefficiencies, resolving issues at its Hobart facility and expanding its distribution network with new regional service centers in Texas and Georgia. The company continues to generate strong free cash flow, amounting to $399 million in FY24, with 75% of it returned to shareholders through buybacks and dividends, reflecting its commitment to shareholder value.