On Mar 15, we issued an updated research report on TriMas Corporation (TRS - Free Report) . The company will gain from robust-end market demand, strong pipeline of both product and process innovation, and focus on leveraging the TriMas Business Model. However, margin pressure owing to higher commodity costs and tariffs remain near-term headwinds.
Favorable Demand to Fuel 2019 Results
General industrial activity levels have improved, particularly in the United States, and this bodes well for TriMas. Backed by continued growth across all markets, the company anticipates organic sales growth of 3% to 5% in 2019. Operating profit is anticipated to be within the range of 16% to 17%. Adjusted earnings per share in 2019 is expected to lie between $1.82 and $1.92. The mid-point of guidance reflects year-over-year increase of approximately 7%. Persistent growth is expected across markets. 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 refocused certain commercial efforts, including realigning and enhancing sales functions, and improvement of cost structure.
Positive Momentum in Segments
The company anticipates the Specialty Products segment to attain sales growth of 4-6% in 2019 while operating profit margin is projected in the range of 11% to 13%, driven by its continuous improvement initiatives. The segment’s performance will be aided by improving energy and industrial end-markets.
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 and customers. TriMas’ 2019 organic sales growth guidance for the segment is 3-5% while operating profit margin is projected in the range of 22% to 23%.
In the Aerospace segment, the company is witnessing strong quoting activity, order intake and new business wins, particularly in the fastener product line. It also witnessed some pickup in the military and defense area largely through its distribution customers. For 2019, the company anticipates achieving sales growth of 4-6% while operating margins are envisioned in the band of 16% to 17%.
Focus on TriMas Business Model & Products
TriMas will continue to focus on leveraging the TriMas Business Model, which was implemented in late 2016 to improve management and performance of its businesses. Its innovative solutions through product, process or service, as well as extensive resources will help enhance business performance. The company will gain from connectivity, resource sharing, capitalization and planning.
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 a Woe
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. 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.
Share Price Performance
Shares of TriMas gained 21% over the past year, against the industry’s decline of 29%.
Zacks Rank & Key Picks
TriMas carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the sector include iRobot Corporation (IRBT - Free Report) , CECO Environmental Corp. (CECE - Free Report) and Brady Corporation (BRC - Free Report) . While iRobot sports a Zacks Rank #1 (Strong Buy), CECO Environmental and Brady Corporation carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
iRobot has estimated long-term earnings growth rate of 7.50%. The stock has gained 86% over the past year.
CECO Environmental has estimated long-term earnings growth rate of 15%. Shares of the company have rallied 48% in a year’s time.
Brady Corporation has estimated long-term earnings growth rate of 20.50%. Its shares have gone up 21% over the past year.
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