Zacks Investment Research downgraded TriMas Corporation (TRS) to a Zacks Rank #5 (Strong Sell) on Mar 27, 2014.
Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market. Hence, investors seeking exposure to industrial equipment and component makers are advised to avoid investing in, or those who have already invested in the stock are advised to consider selling their existing holdings in TriMas Corporation.
Why the Downgrade?
TriMas Corporation’s fourth-quarter 2013 results were disappointing, as evidenced by the downward revision in earnings estimates since Feb 20, 2014. The company reported adjusted earnings per share (:EPS) from continuing operations of 31 cents, down 6.1% year over year. The bottom-line result also fell short of the Zacks Consensus Estimate of 36 cents by 13.9%.
Revenues in the quarter increased 7.4% year over year to $323.4 million. The top-line growth was partially offset by 12.9% increase in cost of sales. Higher expenses led to a roughly 380 basis point (bps) fall in gross margin. Selling, general, and administrative expenses in the quarter increased 4.5% year over year.
For 2014, TriMas Corporation anticipates revenue to grow within the 6−8% range, lower than roughly 9.6% growth recorded in 2013.
In the last 60 days, the Zacks Consensus Estimate has decreased 10.1% to $2.22 for 2014 and by 7.5% to $2.58 for 2015. Disappointing results, weak revenue growth outlook, and downward revisions in earnings estimates have made us dubious about TriMas Corporation’s performance in the coming quarters. The company has an Earnings Expected Surprise Prediction (:ESP) of -8.1% for first quarter 2014 and -0.9% for 2014.
Other Stocks to Consider
TriMas Corporation currently has a $1.5 billion market capitalization. Some better-ranked stocks in the industry include NN Inc. (NNBR), Norsk Hydro ASA (NHYDY) and Worthington Industries, Inc. (WOR). While NN Inc. holds a Zacks Rank #1 (Strong Buy), Norsk Hydro and Worthington Industries carry a Zacks Rank #2 (Buy).