Why Is TriMas (TRS) Down 3.5% Since Last Earnings Report?
It has been about a month since the last earnings report for TriMas (TRS). Shares have lost about 3.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is TriMas due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
TriMas Q2 Earnings Meet Estimates, 2019 Outlook Raised
TriMas Corporation delivered adjusted earnings of 50 cents per share in second-quarter 2019 which came in line with the Zacks Consensus Estimate. The figure improved 4% from 48 cents reported in the prior-year quarter.
On a reported basis, the company’s earnings per share of 48 cents shows an improvement from the year-ago figure of 42 cents.
The company’s revenues of $239 million in the reported quarter missed the Zacks Consensus Estimate of $240 million. However, the top line improved 6.4% year over year as sales increased across all segments, both organic and acquisition-related sales growth. However, impact of unfavorable currency exchange somewhat negated these gains.
Cost and Margins
Cost of sales rose 8.7% year over year to $174 million in the reported quarter. Gross profit improved 0.9% year over year to $65.3 million. Gross margin contracted 150 bps to 27.3%.
Selling, general and administrative expenses escalated 3% year over year to $34 million. Adjusted operating profit remained flat at $32 million compared with the prior-year quarter as impact of higher sales were offset primarily by a less favorable sales mix, and increased input and freight costs.Adjusted operating margin contracted 90 bps year over year to 13.4% in the reported quarter.
Packaging: Net sales rose 9% year over year to $104 million as a result of higher sales of health, beauty and home care products related to new product introductions and contributions from the acquisitions of Plastic Srl and Taplast. However, lower sales of food and beverage products, and the impact of unfavorable currency exchange somewhat dampened sales. Adjusted operating profit remained flat at $22.9 million from the prior-year quarter.
Aerospace: Net sales increased 8% year over year to $42.2 million from $39.1 million recorded in the year-earlier quarter, aided by steady demand levels for fasteners. The segment reported adjusted operating profit of $7 million, up 9% year over year on higher sales levels.
Specialty Products: The segment reported revenues of $93 million, an improvement of 3% from the prior-year quarter, primarily driven by higher sales levels in the sealing and fastener, and machined components product lines offset by lower sales of engines and compressors utilized in oil and gas upstream applications, as rig activity and spending remained weak in the United States and Canada, and lower cylinder sales. Adjusted operating profit declined 5% year over year to $10.2 million hurt by less favorable product sales mix, and higher input and freight costs.
TriMas reported cash and cash equivalents of $40.3 million as of Jun 30, 2019, lower than $108 million as of Dec 31, 2018. The company generated $22 million of cash from operating activities during the second quarter of 2019 compared with $37 million reported in the prior-year quarter. At the end of the second quarter of 2019, net debt was approximately $254 million, up from $240 million as of June 30, 2018.
TriMas completed the acquisition of Taplast S.p.A., a designer and manufacturer of dispensers, closures and containers for the beauty and personal care, household, and food and beverage packaging end markets in Europe and North America. Taplast generated revenues of approximately $32 million in 2018.
This acquisition and the prior buyout of Plastic Srl, concluded in January 2019, will augment TriMas’ product breadth, geographic presence, and innovation and engineering capabilities.
TriMas maintained full-year 2019 organic sales growth guidance at 3-5%. However, considering certain softer end markets during the first half of the year, the company anticipates sales growth to come in toward the lower end of the range.Nevertheless, the company raised earnings per share guidance to $1.85-$1.95 from the prior stated range of $1.82 and $1.92. Free cash flow in 2019 is expected to be greater than 100% of net income.
Through 2019, TriMas will continue to focus on the TriMas Business Model, and strive to pursue growth through innovation, and capitalize on market opportunities.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
At this time, TriMas has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
TriMas has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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