TriMas Corporation’s TRS performance continues to be dragged down by the lackluster performance of its packaging segment. The segment’s top-line growth has been in the negative territory over the past four quarters owing to low demand, which has weighed on the company’s overall revenues. TRS’ results have also been negatively impacted by higher input costs.
This Zacks Rank #4 (Sell) company has a market capitalization of around $1 billion.
Let’s discuss the factors that are taking a toll on the company.
TriMas’ packaging segment, which accounted for 59% of the company’s sales in 2022, has been witnessing weak demand since last year. Several of its customers became cautious regarding their spending amid the persisting inflationary scenario and elevated interest rates. They have also been rebalancing their inventories.
Consequently, the packaging segment’s revenues have been on a downtrend over the past straight four quarters. In the last reported quarter, the segment’s revenues had plunged 21%, with organic growth declining 26%. This has also reflected in TriMas’ total sales performance as well, which has also been declining since the third quarter of 2022.
Although TRS had anticipated some demand recovery in the packaging segment this year, the same has not yet materialized. TriMas now anticipates the Packaging segment's year-over-year sales to decline 8% to 2% in 2023. This is in contrast with the 4-10% growth expected earlier. The revised guidance factors in a slower recovery for the back half of the year. The segment's operating margin is projected to be around 16-17%, which is lower than the prior-guided range of 17% to 19%.
Consolidated sales growth is now projected to be 5-10% for 2023, which is much lower than the 10% to 15% range stated previously. TriMas expects adjusted earnings per share in the range of $1.80 to $1.95 for 2023. The midpoint indicates a year-over-year decline of 11.6%, mainly reflecting the weak packaging results.
TriMas’ largest raw material purchases are for resins (polypropylene and polyethylene), steel, aluminum and other oil and metal-based purchased components. It has also been burdened with higher wage rates and freight costs. Supply-chain headwinds and labor shortages have also been
impacting the company's results.
The Zacks Consensus Estimate for the company’s 2023 earnings has been revised 4% downward in the past 60 days. The unfavorable estimate revisions indicate analysts’ lack of confidence in the stock.
Price Performance
The company’s shares have declined 8.4% over the past year against the industry’s 16.7% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Astec Industries, Inc. ASTE, Caterpillar Inc. CAT and EnerSys ENS. ASTE sports a Zacks Rank #1 (Strong Buy), while CAT and ENS have a Zacks Rank #2 (Buy) each, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $2.81 per share. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. ASTE’s shares have gained 36% in the past year.
Caterpillar has an average trailing four-quarter earnings surprise of 18.5%. The Zacks Consensus Estimate for CAT’s 2023 earnings is pegged at $19.81 per share. The consensus estimate for 2023 earnings has moved 11.4% north in the past 60 days. Its shares have gained 51% in the past year.
The Zacks Consensus Estimate for EnerSys’ 2023 earnings per share is pegged at $7.78. The consensus estimate for 2023 earnings has moved 1% north in the past 60 days. It has a trailing four-quarter average earnings surprise of 10.3%. Shares of ENS have rallied 55% in the past year.
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