Atkore Post-Earnings Update: Challenges, Market Reaction, and the Path Forward

When I first started buying Atkore ATKR 0.00%↑ , the thesis was centered on their leadership in electrical raceways, exposure to structural growth themes like data centers and renewable energy, and a management team with a strong track record of capital allocation. However, the latest results and guidance have shifted the story, revealing a more challenging landscape than initially expected. Atkore reported net sales of $788.3 million, down 9.4% year-over-year, driven by a 12% drop in average selling prices, partially offset by 3% volume growth. Adjusted EBITDA fell 39.6% to $140.2 million, reflecting both pricing pressures and operational challenges earlier in the year. Guidance for FY25 was significantly reduced, with revenue expected to be $2.9–$3.2 billion and adjusted EBITDA projected at $475–$525 million. EBITDA margins are set to compress further to ~16.4% from 24.1% as pricing normalization drags on longer than anticipated.

Intensifying Competition

The most concerning development is the growing competition in the PVC market. A new player is set to add 10% capacity, while imports from Colombia and the Dominican Republic are increasing supply. In the steel conduit business, import pressures remain a persistent drag on margins. This competitive landscape is eroding Atkore’s pricing power faster than anticipated, raising questions about the durability of their post-pandemic margin gains. Pricing normalization, initially expected to stabilize in FY25, now appears likely to drag into FY26. One potential catalyst for Atkore is government intervention, specifically tariffs on steel imports. If tariffs are implemented, they could level the playing field, particularly in Atkore’s steel conduit segment, which has been undercut by cheaper imports. Management has indicated that any benefits from such policies would likely materialize in late FY25 or early FY26, providing a potential boost to profitability. That said, I’m hesitant to rely on government policy as the cornerstone of an investment thesis. While tariffs could provide temporary relief, basing a long-term position on regulatory support introduces significant uncertainty. I prefer businesses with competitive advantages that don’t hinge on external interventions.

Long-Term Trends Provide a Foundation

Despite these challenges, Atkore’s exposure to megatrends like electrification, renewable energy, and data center expansion remains a compelling part of the story. These sectors will require substantial investments in infrastructure over the next decade, providing steady demand for Atkore’s products. Additionally, the company continues to generate robust free cash flow ($399 million in FY24) and returned 75% of it to shareholders through buybacks and dividends. The operational issues at the Hobart facility, which impacted margins earlier in the year, have been resolved, and Atkore has expanded its distribution network with new regional service centers in Texas and Georgia. These developments show that the company is still making progress on its strategic initiatives.

Stock Reaction

Here’s where it gets interesting. The stock initially sold off after hours, hitting a low of $74 on low volume. But at the open, it came roaring back, trading 500K shares in the first hour and steadily climbing throughout the day. It’s now sitting at $94—higher than it was before earnings. This reaction tells us a lot. Despite the guidance cut for FY25, the market is looking past near-term challenges and pricing in stabilization. Investors are likely focused on tailwinds from infrastructure spending, which should ramp up in the back half of FY25, along with stabilizing margins and an eventual top-line recovery. As I mentioned in my initial write-up, the valuation at these levels seems to already price in a lot of bad news, which may be limiting further downside.

Valuation and Outlook

The shares are now trading at 7.2x FY25 EV/Adjusted EBITDA, with margins trending more in line with my initial downside scenario of 17%. In that scenario, I assumed an 8x EBITDA exit multiple, 3% annual reduction in shares outstanding, and GDP-like top-line growth once pricing stabilizes. At these levels, the stock seems to be roughly at fair value. The real upside lies in a potential margin surprise. If Atkore can manage to stabilize pricing and drive margins back toward 20%—even partially offsetting the declines from pandemic highs—it would significantly enhance the equity story. Margins closer to 20% would translate into a high-teens IRR over the next few years, making the stock much more compelling from a long-term perspective. For now, the stock’s valuation reflects the current challenges and a conservative margin outlook. But stabilization in pricing, execution on infrastructure tailwinds, and better-than-expected margins could shift the trajectory meaningfully. This setup keeps me engaged, but I’m closely watching for tangible signs of margin improvement and competitive stabilization.

Atkore’s results and guidance underscore the challenges of competing in a commoditized industry with intensifying pressures. While the company has meaningful exposure to long-term growth trends, the near-term risks, particularly around pricing and competition, are more pronounced than expected. The possibility of tariffs offers a potential upside, but I’m cautious about relying on government policy as a driver for success. For now, I’m holding my position but watching closely for signs of stabilization in pricing and competition. If management can navigate these headwinds, the long-term case remains intact—but the risk-reward balance has clearly shifted.