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TriMas Rides on New Products & Strong Markets, Costs High

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On Sep 12, we issued an updated research report on TriMas Corporation TRS. The company will gain from its strong pipeline of both product and process innovation, and focus on leveraging the TriMas Business Model. However, weakness in industrial end markets on account of lower global trading activity and the implementation of tariffs remain near-term headwinds. Further, margin pressure owing to higher commodity costs remains a concern.

Strong Q2 Results & 2019 Guidance

TriMas Corporation delivered adjusted earnings of 50 cents per share in second-quarter 2019, which improved 4% from 48 cents reported in the prior-year quarter. The company’s revenues of $239 million in the reported quarter, improved 6.4% year over year as sales increased across all segments.

TriMas’ 2019 earnings per share guidance is pegged between $1.85 and $1.95. The mid-point of the guidance range suggests year-over-year increase of 9% over the earnings per share of $1.75 in fiscal 2018.

The Zacks Consensus Estimate for earnings for fiscal 2019 is $1.91, indicating an improvement 9.14% from the year-ago quarter. The estimate for revenues for the fiscal is currently pegged at $934.5 million, suggesting growth of 6.54% from the year-ago reported figure.

Segments Poised for Growth in 2019

The company expects the Specialty Products segment to attain sales growth of 4-6% in 2019 while operating profit margin is anticipated in the range of 11% to 13%, driven by its continued focus on capturing market demand and managing cost structure.

The packaging segment 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). Further, the segment continues to witness robust quoting activity within 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 21% to 22%.

In the Aerospace segment, the company is witnessing strong quoting activity, order intake and new business wins. For 2019, the company anticipates achieving sales growth of 4-5% while operating margins are envisioned in the band of 16% to 17%.

TriMas Business Model, Product Pipeline to Fuel Growth

TriMas will continue to focus on leveraging the TriMas Business Model, which was implemented in late 2016 to improve management and performance of businesses. Its innovative solutions through product, process or service, and extensive resources will help enhance business performance. TriMas also has a strong pipeline of both product and process innovation that will sustain long-term growth and position its businesses to capitalize on market opportunities and minimize market disruptions.

Acquisitions to Boost Growth

TriMas has acquired Plastic Srl, a privately-owned manufacturer of polymeric caps and closures for home-care product applications. The buyout will expand the company’s geographic presence and capacity in Europe. It will also added new products and bolster production capability.

TriMas also acquired Taplast S.p.A., a designer and manufacturer of dispensers, closures and containers for the beauty and personal care, household and food packaging end markets, serving customers predominantly in Europe and the Americas. The acquisition adds to TriMas’ product offering and expands geographic presence. These acquisitions are in sync with the company’s strategy to invest and accelerate growth of its packaging platform.

Headwinds to Counter

Sales to the industrial end market remain subdued on account of lower global trading activity, which will weigh on TriMas’ revenues in 2019. Further, 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 impact 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 certain of these countermeasures.

Share Price Performance

Shares of TriMas have fallen 1.0% over the past year, compared with the industry’s decline of 15.5%.
Zacks Rank & Key Picks

TriMas carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are AGCO Corporation (AGCO - Free Report) , Albany International Corporation AIN and UFP Technologies, Inc. UFPT. All of these stocks carry a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AGCO Corp has a projected earnings growth rate of 31.11% for the current year. The stock has gained 30% over the past year.

Albany International has an estimated earnings growth rate of 33.85% for 2019. The company’s shares have gained 8% in a year’s time.

UFP Technologies has an expected earnings growth rate of 8.10% for the ongoing year. The stock has appreciated 15% over the past year.

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