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TriMas (TRS) Rides on Coronavirus Induced Demand for Packaging

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On Dec 1, we issued an updated research report on TriMas Corporation TRS. Its Packaging segment continues to benefit from increasing demand for personal hygiene products, home and industrial cleaning, food and beverage, and pharmaceuticals amid the coronavirus pandemic. The company is advancing well with TriMas Business Model that aims to improve the performance of its businesses. Moreover, buyouts to augment portfolio and expand geographic presence will drive growth. The company’s solid pipeline of product and process innovation also bodes well.

Packaging Segment Drives Results

TriMas reported revenues of $199 million in third-quarter 2020, reflecting year-over-year increase of 6% on record sales in the Packaging segment and recent buyouts. Adjusted earnings was 43 cents per share, up 19% year over year.

Notably, the Packaging segment has been benefiting from high demand for dispensing pumps and closure products sold into applications that help fight the spread of germs or are used in cleaning amid the pandemic. Backed by this momentum, the Packaging segment’s sales is expected to increase 21-23% year over year in 2020. TriMas is also witnessing escalating demand for personal care and home care products, and is planning to increase capacity globally to meet customer requirements. Further, there has been a pickup in industrial activity over the past few months, which will get reflected on TriMas’ results.

Overall sales for the company in 2020 is expected to increase 4-6% year over year. TriMas anticipates 2020 adjusted earnings per share between $1.45 and $1.50. The company had reported adjusted earnings of $1.45 per share in 2019. In the wake of the uncertain market conditions amid the coronavirus pandemic, the company has taken steps to lower costs, which in turn will drive margins.

Acquisitions to Aid Growth

TriMas acquired Plastic Srl and Taplast in 2019, which augmented its product offering and expanded geographic presence while accelerating growth of packaging platform. In February 2020, TriMas acquired RSA Engineered Products, which expanded the company’s aerospace presence into environmental control system applications, the defense and business jet markets, and aerospace aftermarket.

The company has also acquired theRapak brand, including certain bag-in-box product lines and assets, from Liqui-Box. The Rapak brand name, and bag-in-box applications and products will improve its packaging portfolio.

Taking all of these buyouts into account, TriMas’ annual sales will go up to $800 million with more than 80% of its sales stemming from Packaging and Aerospace markets. The company recently signed an agreement to acquire Affaba & Ferrari, a designer and manufacturer of engineered caps and closures for food and beverage, and industrial applications, based in Italy. TriMas has a robust pipeline of potential M&A in the Packaging and Aerospace segments.

Even after acquisitions, TriMas’ total debt to total capital ratio was at 0.35 as of Sep 30, 2020 — much lower than the industry’s 0.73. The company ended the third quarter with $389.2 million of unrestricted cash and aggregate availability under its revolving credit facility. The company’s strong balance sheet and track record of strong cash flow generation poises it well to sail through the troubled times, and provides both ample capacity and flexibility to fund its capital allocation priorities.

Other Growth Drivers in Place

TriMas will continue to focus on leveraging the TriMas Business Model, which was implemented in late 2016 to improve management and performance of its businesses. Its innovative solutions through product, process or service, and extensive resources will help enhance business performance. The company also has a strong pipeline of both product and process innovation that will sustain long-term growth, and position its businesses to capitalize on market opportunities and minimize market disruptions.

Share Price Performance

Shares of TriMas have gained 8.7% over the past three months, compared with the industry’s rally of 21.5%.

Zacks Rank & Other Stocks to Consider

TriMas carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the Industrial Products sector include iRobot Corporation IRBT, Crown Holdings, Inc. CCK and SiteOne Landscape Supply, Inc. SITE. While iRobot flaunts a Zacks Rank #1 (Strong Buy), Crown Holdings and SiteOne Landscape carry a Zacks Rank of 2, at present. You can see the complete list of today's Zacks #1 Rank stocks here.

iRobot has an estimated earnings growth rate of 18.8% for the ongoing year. Shares of the company have gained 7% in the past three months.

Crown Holdings has a projected earnings growth rate of 11.7% for fiscal 2020. Over the past three months, the company’s shares have appreciated 26%.

SiteOne Landscape has an expected earnings growth rate of 28.6% for 2020. The stock has climbed 13% in three months’ time.

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