TriMas (TRS) Q2 Earnings Match Estimates, Sales Dip Y/Y
TriMas Corporation TRS reported second-quarter 2023 adjusted earnings per share (EPS) of 50 cents, which came in line with the Zacks Consensus Estimate. The bottom line however declined 17% from the prior-year quarter’s figure of 60 cents, mainly reflecting the ongoing weakness in packaging demand, primarily for dispensers and closures used in personal care, food and industrial applications. Customers are engaged in destocking and spending has therefore been muted, amid inflationary concerns.
Including the impact of one-time items, the company reported EPS of 26 cents, compared with the year-ago quarter's figure of 47 cents.
The company's revenues dipped 2% year over year to $233 million. The impact of low demand on the Packaging segment offset organic growth in the TriMas Specialty Products and TriMas Aerospace groups, and acquisition-related sales. The top line missed the Zacks Consensus Estimate of $256 million.
Overall, organic sales declined 8.1% in the quarter. Our model had projected 1.9% growth in organic sales. The variance stemmed mainly from the slower-than-expected recovery in the packaging segment. Contribution from acquisitions to sales was 6.2% in the quarter, which was in line with our projection of 6.3%.
TriMas Corporation Price, Consensus and EPS Surprise
TriMas Corporation price-consensus-eps-surprise-chart | TriMas Corporation Quote
Costs & Margins
The cost of sales inched up 1% year over year to $178.7 million in the reported quarter. Gross profit declined 10% year over year to $54.5 million. The gross margin was 23.4%, compared with 25.5% in the prior-year quarter.
Selling, general and administrative expenses were up 12% year over year to $34.5 million. Adjusted operating profit declined 15% year over year to $27 million, owing to lower packaging volumes. Adjusted operating margin contracted to 11.7% from the prior-year quarter’s figure of 13.5%.
Segment Performances
Packaging: Net sales came in at $117 million, compared with the year-ago quarter’s figure of $148 million. Weak market demand for dispensers and closures used in personal care, food and industrial applications hurt the segment’s results.
The revenue figure was lower than our estimate of $142.8 million. Organic sales were down 26%. Our model had projected a 7.5% decline in organic sales based on expectations of a recovery in demand starting from the second quarter. However, this did not materialize. TRS now expects a more gradual recovery in the second half of the year.
Adjusted operating profit plunged 25% year over year to $22 million in the reported quarter.
Aerospace: Net sales increased 26% year over year to $60 million in the second quarter. The improvement was attributed to demand stemming from higher aerospace production as well as acquisition-related sales. Our estimate for the segment’s revenue was $62 million. Organic sales were up 11%, a bit lower than our projection of 13.9% as the segment witnessed labor and supply constraints amid high demand.
The segment reported an adjusted operating profit of $4 million, compared with the year-ago quarter’s figure of $3 million.
Specialty Products: The segment's revenues surged 34% year over year to $56 million. Revenues were higher than our projection of $51 million. Organic sales were up 33.7%, higher than our estimate of 21.6%.
Elevated demand for packaged gas steel cylinders used in construction and HVAC applications, as well as increased sales of stationary power generation and compressor units, were instrumental in the segment’s outperformance. Adjusted operating profit climbed 79% year over year to $12.1 million.
Financial Performance
In the second quarter of 2023, TriMas repurchased approximately 451,882 of its outstanding common stock for $13.1 million. TriMas generated $16.5 million of adjusted cash flow from operations in the quarter under review, compared with $22 million in the prior-year quarter.
The company ended the year with $41.9 million of cash on hand. TRS had $253.4 million of cash and available borrowing capacity under its revolving credit facility. As of Jun 30, 2023, the total debt was $417 million, compared with $395 million as of Dec 31, 2022.
2023 Guidance
TriMas has lowered its guidance for 2023 reflecting the lower-than-expected recovery in the packaging segment. The company now expects sales growth of 5% to 10% for 2023, lower than the earlier stated range of 10% to 15%.
It expects adjusted EPS to be in the range of $1.80 to $1.95. Compared to the earnings of $2.12 in 2022, the midpoint of the new range suggests an 11.6% decline.
The company had earlier provided an EPS guidance range of $2.00-$2.20 for the year. Free cash flow is projected to be more than 100% of net income in 2023.
Price Performance
Shares of TriMas have declined 6% in the past year against the industry’s 26% growth.
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Zacks Rank & Stocks to Consider
TriMas carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Worthington Industries, Inc. WOR, The Manitowoc Company, Inc. MTW and Terex Corporation (TEX). WOR and MTW sport a Zacks Rank #1 (Strong Buy) at present, and TEX has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 14.9%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $5.65 per share. The consensus estimate for 2023 earnings has moved 22.6% north in the past 60 days. Its shares have gained 52.2% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 256.3%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at $1.12 per share. The consensus estimate for 2023 earnings has moved 7.8% north in the past 60 days. MTW’s shares have gained 57.8% in the last year.
The Zacks Consensus Estimate for Terex’s 2023 EPS is pegged at $1.61. Estimates remained unchanged in the last 60 days. The company has a trailing four-quarter average earnings surprise of 27.1%. TEX gained 81.3% in the last year.
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