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Titanium Metals EPS Meets, Revs Lag

ATI RTI

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Titanium Metals Corporation posted earnings of 17 cents per share in the second quarter of 2012, down from the year-ago quarter’s earnings of 18 cents. The results were in line with the Zacks Consensus Estimate.

Revenues

Revenues increased 3.6% to $281.7 million in the second quarter from $272 million in the prior-year quarter, missing the Zacks Consensus Estimate of $289 million. Higher selling prices due to strong demand for titanium products within the commercial aerospace sector led to the rise in sales in the quarter.

Costs and Margins

Cost of sales increased 5.5% over the prior-year quarter to $220.7 million. As a percentage of sales, costs increased to 78.3% in the reported quarter from 76.9% in the year-ago quarter. In the reported quarter, gross profit was $61 million compared with $62.9 million in the year ago quarter, reflecting lower sales volume. Selling, general and administrative expense increased 5.4% year over year to $17.7 million.

Operating income in the reported quarter was $43.7 million compared with $46.5 million (include a one-time gain of $2.1 million) in the year-ago quarter.

Shipments

Melted product shipments of 1,470 metric tons reflect a 17.9% decline from the last year’s shipments of 1,790 metric tons. Average selling price increased from $20.65 per kilogram to $22.55 per kilogram. Milled products shipments inched down 2.6% to 4,110 metric tons and product prices moved up 7.7% to $55.10 per kilogram.

Outlook

Moving ahead, Titanium Metals envisions continued growth in the commercial aerospace sector over the long term as global fleet replacement extension in developing regions such as Asia, the Middle East and South America, support future titanium demand.

In order to meet the demand, the company has also initiated several capital projects to increase melt capacity and improve efficiency at certain facilities in the U.S. and abroad that are expected to finish in two years.

Titanium remains confident of ensuring maximum return through its cost efficient programs and manufacturing and raw material flexibility.

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 #2 Rank, which translates into a short-term (1 to 3 months) Buy rating.

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