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TriMas (TRS) Down 6.2% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for TriMas (TRS - Free Report) . Shares have lost about 6.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is TriMas due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

TriMas Q1 Earnings Surpass Estimates, Improve Y/Y

TriMas Corporation delivered adjusted earnings of 46 cents per share in first-quarter 2019 which surpassed the Zacks Consensus Estimate of 42 cents. The bottom line also improved 12% from 41 cents reported in the prior-year period.
 
On a reported basis, TriMas reported earnings per share of 42 cents compared with first-quarter 2018’s figure of 53 cents.
 
The company generated revenues of $221.3 million in the reported quarter, missing the Zacks Consensus Estimate of $225 million. The top-line figure improved 2% year over year on account of organic and acquisition-related sales growth which was partially offset by the unfavorable impact of currency exchange.

Cost and Margins

Cost of sales rose 3% year over year to $161 million in the reported quarter. Gross profit fell 0.9% year over year to $59.8 million. Gross margin contracted 80 bps to 27%.
 
Selling, general and administrative expenses escalated 35% year over year to $34 million. Adjusted operating profit rose 1.2% to $28.4 million from the prior-year quarter. Adjusted operating margin contracted 10 bps year over year to 12.8% in the quarter.
 
Segment Performance
 
Packaging: Net sales inched up around 1% year over year to $89 million as a result of higher sales of health, beauty and home care products related to new product introductions and continued growth in Asia, and incremental sales related to the acquisition of Plastic Srl. Adjusted operating profit dropped 5% year over year to $18.7 million owing to the impact of a less favorable product sales mix and higher costs related to the acquisition of Plastic Srl.
 
Aerospace: Net sales increased 1.4% year over year to $38.3 million from $37.8 million recorded in the year-earlier quarter, aided by steady demand levels for fasteners. The segment reported adjusted operating profit of $6.2 million, up 35% year over year. This can be attributed to improved production efficiencies and more favorable product sales mix.
 
Specialty Products: The segment reported revenues of $94 million, an improvement of 3% from $91 million recorded in the prior-year quarter, primarily driven by higher sales levels of all brands due to refocused commercial efforts and higher end-market demand. Adjusted operating profit declined 3% year over year to $10.9 million raw-material cost inflation negated the gains from higher sales levels.
 
Financial Performance
 
TriMas reported cash and cash equivalents of $84 million as of Mar 31, 2019, lower than $108 million as of Dec 31, 2018. The company generated $8.1 million of cash from operating activities during the first quarter of 2019 compared with $16.2 million reported in the prior-year quarter. At the end of 2018, net debt was approximately $210 million, up from $185 million as of Dec 31, 2018.

TriMas acquired Taplast S.p.A., a designer and manufacturer of dispensers, closures and containers for the beauty and personal care, household, and food and beverage packaging end markets in Europe and North America. Taplast generated revenues of approximately $32 million in 2018. Taplast will be a wholly-owned division of TriMas’ Rieke business and will be reported in the Packaging segment.

This acquisition, along with the prior buyout of Plastic Srl completed in January 2019, will augment TriMas’ product breadth, geographic presence, and innovation and engineering capabilities.
Guidance
 
TriMas maintained full-year 2019 organic sales growth guidance at 3-5%. The company anticipates earnings per share to lie between $1.82 and $1.92. The mid-point of the guidance range projects year-over-year growth of 5%. Free cash flow in 2019 is expected to be greater than 100% of net income.
 
Through 2019, TriMas will continue to focus on the TriMas Business Model, and also strive to pursue growth through innovation, and capitalize on market opportunities.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, TriMas has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, TriMas has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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