On Jan 2, we issued an updated research report on TriMas Corporation
(TRS - Free Report
) . The company will gain from robust-end market demand, focus on improving cost structure and momentum in its segments. Further, efforts to improve operating efficiency under the TriMas Business Mode and strong pipeline of both product and process innovation will also fuel growth. However, margin pressure owing to higher commodity costs and tariffs remain near-term headwinds for TriMas.
Poised for Improved 2018 Results
TriMas’ full-year 2018 organic sales growth guidance is at around 6% year over year. Meanwhile, the company’s earnings per share guidance is pegged at $1.72-$1.78. Mid-point of the guidance reflects year-over-year increase of approximately 25%. The Zacks Consensus Estimate for fiscal 2018 for earnings is pegged at $1.75, reflecting year-over-year growth of 25%.
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.
Positive Momentum in Segments
The Specialty Products segment’s performance will be aided by improving energy and industrial end-markets. Management also continues to assess the cost structure of the segment. The packaging segment, the company’s most profitable business, is likely to 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. In the Aerospace segment, the company is witnessing solid order intake and order activity.
Focus on TriMas Business Model & Products
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, and extensive resources will help strengthen business. Consequently, TriMas will continue to realize synergies by refocusing on these efforts under the business model. This in turn will aid the results.
The company also has a robust pipeline of both product and process innovation that will support long-term growth and position its businesses to capitalize on market opportunities. It will also aid in minimizing market disruptions.
Raw Material Inflation to Dent Results
The company’s results are being impacted by higher commodity costs, particularly steel, aluminum and oil based commodities. It also has to contend with increased tariffs on imported goods. During the remainder of the year, TriMas plans to counter the impact of higher commodity costs and the impacts of tariffs, through commercial actions, supply chain management, leveraging its global manufacturing footprint and continued management of businesses under the TriMas Business Model. Although this is likely to somewhat mitigate the impact of these incremental costs, it will take some time to implement some of these countermeasures. The company anticipates an impact of about $3-$4 million of incremental costs in the fourth quarter and around $10 million in fiscal 2018.
Share Price Performance
Shares of TriMas dipped 2% over the past year, compared with the industry
’s decline of 40%.
Zacks Rank & Key Picks
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