On Jul 10, we issued an updated research report on TriMas Corporation
(TRS - Free Report
) . The company’s performance can be attributed to focus on leveraging the TriMas Business Model, strong product pipeline, and process innovation. However, Aerospace segment’s revenues is likely to bear the brunt of the company’s decision of exiting less profitable business in the segment while resin pricing pressure will affect Packaging segment’s margins.
Upbeat Q1 & Fiscal 2018
TriMas’ first-quarter 2018 adjusted earnings improved 37% year over year to 41 cents per share, benefiting from its efforts to capitalize on increased demand through refocused commercial efforts as well as streamlined cost structure.
The company projects earnings per share between $1.60 and $1.75 for 2018, which marks year-over-year growth of 20% at the mid-point. It estimates organic sales to be up 3% and operating margin to be nearly 10-12% for the year.
The Zacks Consensus Estimate for fiscal 2018 for earnings is at $1.70, reflecting year-over-year growth of 21% while revenues are at $854 million, projecting year-over-year improvement of 4%.
General industrial activity levels have improved, particularly in the United States, and this bodes well for TriMas. The company is well positioned to take advantage of the incremental volume opportunities and continues to capitalize on its internal sales growth programs. The company has also refocused certain commercial efforts, including realigning along with enhancing its sales functions and improvement of cost structure.
Segment Restructuring Remains a Catalyst
The company realigned reporting structure in first-quarter 2018 by combining Engineered Components and Energy segments into a single reporting segment — Specialty Products. TriMas anticipates the new segment to attain sales growth of nearly 5% in 2018.
The Specialty Products segment will incorporate the Lamons, Arrow Engine and Norris Cylinder industrial businesses. The segment will benefit from improved performance in these businesses on the back of recovering energy and industrial end-markets. Management also continues to assess the cost structure of the segment.
Packaging Segment Set for Growth Despite Headwinds
The packaging segment, the company’s most profitable business, should benefit from new products and realignment of the segment’s manufacturing footprint. The business continues to develop specialty dispensing and closure applications for higher-growth global markets (industrial, food and beverage and heath, beauty and home care). The company is developing its global marketing and salesforce to better align with end-markets and customers. Further, the segment continues to witness robust quoting activity within its existing and new product lines.
However, the Packaging segment’s margins are likely to be affected by resin pricing pressure and the near-term impact from capacity additions. It will also be impacted by continued investments for sales and technical resources, including new products.
TriMas Business Model, Products to Drive Growth
TriMas continues to focus on leveraging the TriMas Business Model in order to drive the company’s performance. Its innovative solutions through product, process or service, as well as extensive resources will help strengthen business. Consequently, by refocusing on these efforts under the business model, TriMas will continue to recognize synergies, aiding results.
The company also has a robust pipeline of both product and process innovation that will sustain long-term growth and position its businesses to take advantage of market opportunities as well as minimize market disruptions.
Aerospace Segment to Generate Lower Revenues
In an effort to continue to streamline operations and improve margins in the Aerospace segment, TriMas is exiting up to $4 million of less profitable business, primarily in the machine components product line. Though this will help improve the long-term profitability of this business, it will dent revenue growth for the year.
Share Price Performance
TriMas has outperformed its industry
with respect to price performance over the past year. The stock has appreciated around 34.6%, against the industry’s decline of 15.5%.
Zacks Rank & Stocks to Consider
TriMas carries a Zacks Rank #3 (Hold).
Actuant has a long-term earnings growth rate of 15.6%. Its shares have rallied 16% over the past year.
DMC Global has a long-term earnings growth rate of 20%. The company’s shares have appreciated 260% in the past year.
Chart Industries has a long-term earnings growth rate of 26.9%. The stock has surged 85% in a year’s time.
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