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Shiloh Industries' (SHLO) Q3 Earnings Up Y/Y on Solid Demand

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Shiloh Industries Inc. (SHLO - Free Report) reported impressive results for third-quarter fiscal 2017 (ended Jul 31, 2017) compared with the year-ago quarter. Adjusted earnings of 7 cents per share came in above the year-ago tally of 3 cents. The bottom line benefited from higher revenue generation on the back of solid product demand and low interest expenses in the quarter.
 
However, adjusted earnings fell nearly 80.6% from the previous quarter’s tally of 36 cents. The sequential decline stemmed from comparatively lower revenues and higher provision for income taxes.

Top-Line Results

In the quarter, Shiloh Industries generated revenues of $256.8 million, up 3.2% year over year. The top-line results benefited from increase in production volume of automotive and light truck in Europe as well as from growth in production of commercial vehicle in North America and Europe.  

Geographically, revenues generated in Europe increased 27.6% while that in the United States and Rest of the World slipped 0.1% and 8.5%, respectively.

Margins

Shiloh Industries’ margin profile improved in the fiscal third quarter. Cost of sales grew 1.4% year over year, representing roughly 88.8% of net revenues compared with 90.4% in the year-ago quarter. Gross margin increased 160 basis points to 11.2% on the back of favorable product mix and improvement in operational efficiencies. Selling, general and administrative expenses were 8.3% of net revenues compared with 7.1% in the year-ago quarter.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $18.4 million, up from $16.5 million in the prior-year quarter. EBITDA margin was 7.2% versus 6.6% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the fiscal third quarter, Shiloh Industries had cash and cash equivalents of $14.3 million, up from $11.1 million at the previous quarter-end. The company’s long-term debt was $177.3 million, down 27% sequentially.

In the nine months ended Jul 31, Shiloh Industries’ net cash generated from operating activities totaled $69.5 million, up 40.4% from the year-ago period. Capital expenditure totaled $32.6 million, up from $18.2 million in the prior-year period.

Conclusion

Increase in Shiloh Industries’ new business wins as well as rise in light vehicle production in its prime operating areas will prove advantageous for it. However, the company is facing competition from other players in the steel industry that may restrict its growth momentum.

Shiloh Industries currently has a market capitalization of $198 million.

Some stocks worth considering in the industry are POSCO (PKX - Free Report) , Schnitzer Steel Industries, Inc. (SCHN - Free Report) and Universal Stainless & Alloy Products, Inc. (USAP - Free Report) . While both POSCO and Schnitzer Steel sport a Zacks Rank #1 (Strong Buy), Universal Stainless & Alloy Products carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

POSCO’s earnings estimates for 2017 and 2018 improved over the past 60 days. Also, over the next three to five years, its earnings are projected to grow 5%.

Schnitzer Steel Industries’ earnings estimates for fiscal 2018 have been revised upward over the last 60 days.
 
Universal Stainless & Alloy Products has witnessed positive revisions in earnings estimates for 2017 and 2018, over the past 60 days. Also, the company pulled off a positive earnings surprise of 30.77% in the last reported quarter.

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