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Shiloh Industries' (SHLO) Q2 Earnings Dip Y/Y, View Intact

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Shiloh Industries Inc. SHLO reported weak bottom-line results for second-quarter fiscal 2018 (ended Apr 30, 2018). Its share price declined 5.1% yesterday, ending the trading session at $10.01.

The company’s adjusted earnings in the reported quarter were 24 cents per share, reflecting a decline of 33.3% from the year-ago tally of 36 cents.

Top Line Improve Y/Y

In the quarter under review, Shiloh Industries’ net revenues were $297.3 million, reflecting growth of 8.9% (or $24.3 million) from the year-ago quarter. Of the total improvement, acquisitions contributed roughly $23.5 million while the rest was influenced by organic sales growth and negative impacts of divestitures.

On a geographical basis, revenues from the United States totaled $213.6 million. It contributed approximately 71.8% of net revenues. Operations from Europe generated revenues of $74 million, accounting for 24.9% of net revenues. Revenues from Rest of World totaled $9.8 million, representing 3.3% of net revenues.

Margins Weak on Higher Costs and Expenses

In the quarter under review, Shiloh Industries’ cost of sales increased 11% year over year to $265.8 million. It represented 89.4% of net revenues compared with 87.7% in the year-ago quarter. Gross margin declined 170 basis points (bps) year over year to 10.6%. Selling, general and administrative expenses increased 2.2% year over year to $22.1 million, representing 7.4% of net revenues.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $20.3 million, down 17.2% year over year. Adjusted EBITDA margin was 6.8% versus 9% in the second quarter of fiscal 2017.

Balance Sheet and Cash Flow

Exiting the fiscal second quarter, Shiloh Industries’ cash and cash equivalents were $17.6 million, up 59.1% from $11.1 million at the previous quarter end. The company’s long-term debt grew 40.1% sequentially to $255.6 million. The company received $128 million from long-term borrowings while repaid roughly $55 million.

In the first half of fiscal 2018, the company’s net cash flow from operating activities totaled $20.1 million, down 40.8% from the previous year’s comparable period. Capital expenditure surged 32.2% year over year to $23.8 million.


In the quarters ahead, Shiloh Industries anticipates gaining from new business wins as well as efforts to capitalize from rise in demand for SUVs and trucks. Also, synergistic gains from acquired businesses — including Brabant Alucast Netherlands and Brabant Alucast Italy in March 2018 —  as well as benefits from a new engineering lab in Michigan, facility manufacturing aluminum products in China and Tennessee-based magnesium die casting business will be advantageous.

For fiscal 2018 (ending October 2018), the company reaffirmed its adjusted EBITDA guidance of $73-$76 million. Adjusted EBITDA margin is anticipated to be 7-7.2%. Capital expenditure is predicted to be roughly 4-5% of revenues.

Shiloh Industries, Inc. Price

Shiloh Industries, Inc. Price | Shiloh Industries, Inc. Quote

Zacks Rank & Stocks to Consider

Shiloh Industries currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the industry are Ternium S.A. TX, ArcelorMittal MT and Universal Stainless & Alloy Products, Inc. USAP. While Ternium sports a Zacks Rank #1 (Strong Buy), both ArcelorMittal and Universal Stainless & Alloy Products carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ternium S.A.’s earnings estimates for 2018 and 2019 have improved over the past 60 days. It has pulled off a positive earnings surprise of 50.23% in the last four quarters.

ArcelorMittal’s earnings estimates for 2018 and 2019 have been revised upward over the last 60 days. Also, it has delivered a positive earnings surprise of 40.07% in the last four quarters.
Over the past 60 days, Universal Stainless & Alloy Products has witnessed positive revisions in earnings estimates for 2018. Also, the company has pulled off a positive earnings surprise of 21.74% in the first quarter of 2018.

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