On Jun 19, we issued an updated research report on TriMas Corporation TRS. The company is advancing well with TriMas Business Model that aims to improve performance of its businesses. A strong pipeline of product and process innovation and acquisitions aided by a solid balance sheet will drive growth. Nevertheless, ongoing weakness in the industrial markets, aerospace and oil & gas end-markets owing to the coronavirus crisis will act as a headwind until the situation stabilizes.
Coronavirus Impact to be More Pronounced in Q2
TriMas reported revenues of $183 million in first-quarter 2020, reflecting year-over-year increase of 5%, driven by solid growth in the Packaging segment and recent acquisitions. However, adjusted earnings declined 6% from the prior-year quarter to 34 cents per share as higher sales were offset by lower production inefficiencies related to the impact of the COVID-19 pandemic on production planning and operations.
To elaborate, the company’s facilities experienced varying degrees of production inefficiencies, which included temporary idling of production, reduced staff, increased absenteeism or lower efficiency due to social distancing and other proactive protective measures on account of the COVID-19 pandemic. The company anticipates the impact to be more pronounced in the second quarter.
Strong Demand in Packaging to Offset Weakness in Other Markets
The ongoing weakness in end markets like commercial aerospace, oil & gas and industrial sector remain headwinds. Weakening global economic conditions and the impact of the pandemic are weighing on consumer confidence. Consequently, customers have taken a conservative stance to manage their businesses by aggressively destocking inventory and holding back on new product launches. This slowdown in customer orders remains a major headwind. TriMas is thus managing production capacity to align with current demand conditions.
However, given that TriMas serves a diverse set of end markets, it will help the company tide over this crisis. TriMas’ Packaging group manufactures dispensers and closures, which are utilized in applications that help fight the spread of germs, improve personal hygiene, and for home and industrial cleaning, and food and beverage, pharmaceutical and nutraceutical applications. Demand for these products remain strong amid the pandemic. Further, the Specialty Products group supplies steel cylinders, which are utilized for compressed gases in medical oxygen applications. These cylinders have witnessed strong demand lately.
Growth Drivers in Place
In the wake of the uncertain market conditions amid the coronavirus pandemic, the company is taking steps to lower costs. This includes stringently managing capital expenditures, reducing third party expenses and temporary pay reductions.
Meanwhile, TriMas continues to focus on leveraging the TriMas Business Model, which was implemented in late 2016 to improve management and performance of businesses. Further, the company has a strong pipeline of both product and process innovation that will drive long-term growth. It also positions its businesses well to capitalize on market prospects and minimize market disruptions.
Since 2019, TriMas acquired Plastic Srl, Taplast, RSA Engineered Products and the Rapak brand, including certain bag-in-box product lines and assets, from Liqui-Box. Taking all of these acquisitions into account, TriMas’ annual sales will go up to $800 million with more than 80% of sales stemming from Packaging and Aerospace markets. TriMas has a robust pipeline of potential M&A in the Packaging and Aerospace segments.
Even after acquisitions and share repurchases, the company’s total debt to total capital ratio was at 0.41 as of Mar 31, 2020. TriMas ended first-quarter 2020 with $337.3 million of cash and aggregate availability under its revolving credit facility. The company has suspended share buybacks to preserve cash. Its strong balance sheet and track record of strong cash flow generation poises it well to sail through the troubled times as it provides both ample capacity and flexibility to fund its capital allocation priorities.
Share Price Performance
Shares of TriMas have fallen 22.7% over the past year, compared with the industry’s decline of 18.3%.
Zacks Rank & Key Picks
TriMas carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are SiteOne Landscape Supply, Inc. SITE, Axon Enterprise, Inc. AAXN and Broadwind Energy, Inc. BWEN. While SiteOne Landscape sports a Zacks Rank #1 (Strong Buy), Axon Enterprise and Broadwind Energy carry a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
SiteOne Landscape has a projected earnings growth rate of 15.4% for 2020. The company’s shares have gained 64% in the past year.
Axon has an estimated earnings growth rate of 14.2% for the ongoing year. The company’s shares have rallied 23% in a year’s time.
Broadwind Energy has an expected earnings growth rate of 174% for the current year. The stock has appreciated 47% in the past year.
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TriMas Corporation (TRS) : Free Stock Analysis Report
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