Mixed 1Q for Titanium Metals

Titanium Metals Corporation (TIE) posted earnings of 15 cents per share in the first quarter of 2012, down from the year ago earnings of 16 cents. The results missed the Zacks Consensus Estimate by a penny.

Revenues

Revenues increased 10% to $276.7 million from $252 million in the prior year quarter, exceeding the Zacks Consensus Estimate of $275 million. Strong demand for titanium products within the commercial aerospace sector drove the prices and shipments, thus increasing sales in the quarter.

Costs and Margins

Cost of sales increased 7.1% over the prior-year quarter to $218.3 million. As a percentage of sales, costs decreased to 78.9% in the reported quarter from 80.9% in the year-ago quarter. In the reported quarter, gross profit was $58.4 million compared with $48.2 million in the year ago quarter, reflecting higher sales volume. Selling, general, and administrative expense increased 16.2% year over year to $17.2 million.

Operating income, in the reported quarter, was $42.1 million compared with $45 million (include a one time gain of $10.6 million) in the year ago quarter. However, after excluding the one time gain recorded in first-quarter 2011, operating income in the reported quarter jumped 22%. Higher prices coupled with the company’s measures to improve its manufacturing processes contributed to the increase.

Shipments

Melted product shipments of 1,475 metric tons decreased 13.4% from the last year’s shipments of 1,495 metric tons. Average selling price increased from $20.80 per kilogram to $22.95 per kilogram. However, milled products shipments inched up 2.2% to 3,995 metric tons and product prices moved up 5.4% to $54.85 per kilogram.

Outlook

Moving ahead, Titanium Metals envisions aircraft deliveries to remain strong over the long term as fuel efficiency and extension of the global fleet in developing regions such as Asia, the Middle East and South America, support future demand.

We currently have a long-term Neutral recommendation on Titanium Metals. The company, which competes with Allegheny Technologies Inc. (ATI - Analyst Report) and RTI International Metals, Inc. (RTI - Snapshot Report),maintains a Zacks #4 Rank, which translates into a short-term (1 to 3 months) Sell rating.