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TriMas (TRS) Q4 Earnings Miss on Weak Industrial Demand

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TriMas Corporation TRS reported fourth-quarter 2019 adjusted earnings of 31 cents per share, which missed the Zacks Consensus Estimate of 39 cents. The bottom line also declined 9% from 34 cents reported in the prior-year quarter. This can be attributed to weaker-than-expected sales, less favorable mix and increased expedited freight costs.
Including one-time items, the company’s earnings per share of 31 cents, reflecting a decline of 9% from the year-ago figure of 34 cents.

The company’s revenues of $171 million lagged the Zacks Consensus Estimate of $227 million owing to weakness in the North American industrial end markets. However, the top line inched up 0.5% year over year, aided by continued strength of the aerospace fastener business and recent acquisitions.

TriMas Corporation Price, Consensus and EPS Surprise

Cost of sales rose 3% year over year to $127 million in the reported quarter. Gross profit declined 7% year over year to $44 million. Gross margin contracted 210 bps to 25.9%.
Selling, general and administrative expenses fell 5% year over year to $23 million. Adjusted operating profit declined 9% year over year to $21 million as impact of higher sales were offset by a less favorable product sales mix and higher freight and conversion costs. Adjusted operating margin contracted 120 bps year over year to 12.4% in the reported quarter.

Segment Performance

Packaging: Net sales improved 5% year over year to $94 million. Adjusted operating profit was $19.5 million in the reported quarter, down from $20.1 million in the prior-year quarter.

Aerospace: Net sales increased 7% year over year to $41 million from the prior-year quarter. The segment reported adjusted operating profit of $7.4 million, up 15% year over year.
Specialty Products: The segment’s revenues declined 15% year over year to $35.8 million. Adjusted operating profit plunged 51% year over year to $2.7 million.

Financial Performance

TriMas reported cash and cash equivalents of $172.5 million as of Dec 31, 2019, higher than $108 million as of Dec 31, 2018. The company generated $96 million of cash from operating activities during 2019 compared with $111 million in the prior year. As of Dec 31, 2019, net debt was approximately $122 million, down from $185 million as of Dec 31, 2018.

During the fourth quarter, TriMas repurchased 506,522 shares for $15.6 million, bringing the total for the year to 1,230,050 shares for $36.7 million. TriMas' board of directors had authorized an increase in the company's share repurchase program in November 2019, per which the company will purchase up to $150 million of its outstanding stock. As of Dec 31, 2019, $101.1 million remains available under the repurchase authorization.

Major Developments

TriMas has signed agreements to acquire RSA Engineered Products, a manufacturer of complex, highly-engineered products used in aerospace and defense applications. This buyout will enhance the Aerospace segment’s product line offering.

The company has also signed an agreement to acquire the Rapak brand, including certain bag-in-box product lines and assets, from Liqui-Box. The Rapak brand name, and bag-in-box applications and products will improve TriMas’ packaging portfolio. This will not only enable the company to grow in the field liquid packaging solutions but also leverage its strength in advanced closure and dispensing technology. Further, this acquisition will add to its already diverse customer base.

In December, the company completed the sale of its Lamons business. This cut down the company's exposure to the oil and gas market from nearly 25% of sales to less than 5%.

2019 Results

TriMas reported adjusted earnings per share of $1.45 in 2019, down 4% from the prior year. Earnings missed the Zacks Consensus Estimate of $1.79. Sales were $724 million in 2019, up 3% from the previous year. The top line missed the Zacks Consensus Estimate of $924 million.

The company’s earnings per share guidance for 2020 is at 1.50-$1.60. The mid-point of the guidance indicates year-over-year growth of 7%. The company anticipates sales growth of 9% to 11% compared with 2019, with organic sales growth at 1.5-2.5%.

Share Price Performance

Over the past year, shares of TriMas have plunged 22.7% compared with the industry’s decline of 15.1%.
Zacks Rank & Stocks to Consider

TriMas currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are Northwest Pipe Company NWPX,  Tennant Company TNC and Xerox Corporation XRX, each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northwest Pipe Systems has an estimated earnings growth rate of 19.5% for the ongoing year. The company’s shares have gained 37% in the past year.

Tennant has a projected earnings growth rate of 40.7% for 2020. The company’s shares have rallied 21% over the past year.

Xerox Corporation has an expected earnings growth rate of 3.7% for the current year. The stock has appreciated 8% in a year’s time.

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