Titanium Metals Corporation
), also known as TIMET, reported earnings of 11 cents per share
in third-quarter 2012, roughly 21% lower than 14 cents per share
recorded in the year ago quarter. Adjusted earnings (excluding
one-time charges) of 12 cents per share missed the Zacks
Consensus Estimate of 16 cents. The bottom line was hurt by lower
Separately, the company announced that it has agreed to be
acquired by metal fabrication company
Precision Castparts Corp.
) under a deal worth roughly $2.9 billion.
Revenues decreased 1.8% to $257.7 million in the third quarter
from $262.5 million in the prior-year quarter, missing the Zacks
Consensus Estimate of $284 million. Sales were hurt by reduced
volumes for industrial-grade products, which more than offset
higher average selling prices.
Costs and Margins
Cost of sales remained flat year over year at $207.4 million.
As a percentage of sales, costs decreased to 19.5% in the
reported quarter from 21% in the year-ago quarter. In the
reported quarter, gross profit was $50.3 million compared with
$55.1 million in the year-ago quarter, reflecting lower sales
Selling, general and administrative expense increased 3.5%
year over year to $17.7 million. Operating income in the reported
quarter was $32.7 million compared with $38.5 million in the
Shipments and Pricing
Melted product shipments of 1,300 metric tons reflect a 16.9%
decline from the last year level of 1,565 metric tons. Average
selling price increased from $22 per kilogram to $22.75 per
kilogram. Milled products shipments inched up 0.3% to 3,965
metric tons and product prices moved up 2.3% to $53.35 per
TIMET entered into a deal with Precision Castparts, under
which the latter has agreed to acquire all of the company`s
outstanding shares for $16.50 per share in cash. The offer
represents a 44% premium to TIMET's closing price on November
The total value of the transaction is roughly $2.9 billion.
Precision Castparts believes that the acquisition will help it to
streamline its supply chain and cut input costs. The board of
directors of TIMET approved the merger agreement based on the
recommendation of a special committee.
Moving ahead, Titanium Metals envisions continued growth in
the commercial aerospace sector over the long term. The company
believes that its customer supply agreements, which secure major
positions on the engines and structures for key growth platforms,
will be instrumental in growing its aerospace business in the
In order to meet the demand, the company has also initiated
several capital projects to increase melt capacity and improve
efficiency at certain facilities in the U.S. and abroad with
completion expected to coincide with the significant ramp up of
Titanium remains confident of ensuring maximum returns through
its cost efficient programs and manufacturing and raw material
We currently have a long-term Neutral recommendation on
Titanium Metals. The company, which competes with
Allegheny Technologies Inc.
RTI International Metals, Inc.
), maintains a Zacks #4 Rank, which translates into a short-term
(1 to 3 months) Sell rating.
ALLEGHENY TECH (ATI): Free Stock Analysis
PRECISION CASTP (PCP): Free Stock Analysis
RTI INTL METALS (RTI): Free Stock Analysis
TITANIUM METALS (TIE): Free Stock Analysis
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