We are reaffirming our Neutral recommendation on
Titanium Metals Corporation
) following its mixed first-quarter 2012 results. Its earnings of
15 cents a share narrowly missed the Zacks Consensus Estimate.
Revenues rose 10% year over year to $276.7 million, beating the
Zacks Consensus Estimate.
Sales were boosted by healthy demand for titanium products in
the commercial aerospace sector. The company expects this trend to
continue moving ahead. Titanium Metals foresee aircraft deliveries
to remain strong in the long run as fuel efficiency and global
fleet expansion across developing regions support future
Titanium Metals is among the world's leading producers of
titanium-melted products and mill products. It is the largest U.S.
producer of titanium sponge, a key raw material used in the
production of titanium melted and mill products. Titanium Metals
Allegheny Technologies Inc.
RTI International Metals, Inc.
The company's products are finding new areas of growth in
commercial aerospace, defense, energy and several other industries.
The rapid growth in China and other Southeast Asian economies has
ushered in strong demand for titanium-intensive industrial
Titanium Metals has been successful over the last several years
in establishing significant flexibility and cost advantages in its
entire manufacturing process. The company, in 2011, acquired
certain assets, intellectual property and know-how in order to
enhance its production capacities and capabilities while extending
its product technology.
We believe the company's fiscal discipline and industry
experience have allowed it to manage production rates and costs
effectively while investing capital conservatively and maintaining
a healthy balance sheet. Moreover, Titanium Metals' operating
flexibility positions it well to take advantage of opportunities
for strengthening and expanding its presence in key markets.
However, we remain on the sidelines given pricing pressure,
competition, the cyclical nature of aerospace industry and the
expected hike in raw material cost in 2012.
Titanium Metals is facing pricing pressure on mill products.
Moreover, prices of major raw materials including titanium sponge
are expected to rise in 2012.
Our recommendation on the stock is in tandem with a short-term
Zacks #3 Rank (Hold).
ALLEGHENY TECH (ATI): Free Stock Analysis
RTI INTL METALS (RTI): Free Stock Analysis
TITANIUM METALS (TIE): Free Stock Analysis
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