TriMas (TRS) Stock Down 12% in a Year: Is a Revival Likely?
TriMas Corporation’s TRS shares have lost 12% in a year against the industry’s 14.3% growth. This mainly reflects the weak performance of its packaging segment due to low demand. The segment’s organic growth has been in the negative territory over the past five quarters. Escalating raw material costs, supply-chain headwinds and labor shortages have also added to the company’s woes.
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Weak Packaging Demand, Costs Hurt TriMas
TriMas’ packaging segment, which accounted for 59% of the company’s sales in 2022, has witnessed year-over-year decline in its revenues over the past four quarters. Organic growth has been in the red since the second quarter of 2022.
Demand has been weak as several of its customers became cautious regarding their spending amid the persisting inflationary scenario. They have also been rebalancing their inventories.
Although TRS had expected demand to pick up, the same has not yet materialized. Factoring in a gradual recovery for the back half of the year, TriMas anticipates the Packaging segment's year-over-year sales to decline 8% to 2% in 2023. This is in contrast with the 4-10% growth expected earlier.
Consolidated sales growth is now projected to be 5-10% for 2023, much lower than the 10% to 15% range stated earlier. TriMas expects adjusted earnings per share in the range of $1.80 to $1.95. The midpoint indicates a year-over-year decline of 11.6%.
TriMas’ largest raw material purchases are for resins (polypropylene and polyethylene), steel, aluminum and other oil and metal-based purchased components. It has also been burdened with higher wage rates and freight costs. Supply-chain headwinds and labor shortages have also been
impacting the company's results.
The company has a market capitalization of around $1.1 billion. It currently carries a Zacks Rank #3 (Hold). Let’s discuss the factors that indicate that the stock might stage a comeback.
Performance in Other Segments to Buoy TriMas
TriMas’ Specialty Products segment has been witnessing growth in sales on the back of higher demand for steel cylinders and engines and compressors used in construction, heating, ventilation and air conditioning applications. The current backlog and near-term order intake for steel cylinders remain at high levels. The Specialty Products segment's sales are likely to grow 20-25% on a year-over-year basis in 2023, which has been raised from the previous guided range of 10-20%.
The order intake and backlog remain strong within the TriMas Aerospace segment. The company expects organic sales growth to accelerate in 2023. The production challenges experienced earlier will likely begin to ease on account of improved manufacturing efficiencies. The segment's sales are projected to grow 25-30% year over year in 2023. Strong performances in the Specialty Products and Aerospace segments will help counter the weakness in the Packaging segment.
Investments to Aid Growth
The company's strong balance sheet and track record of strong cash flow generation provide ample capacity and flexibility to fund organic growth initiatives and strategic acquisitions, while also returning capital to shareholders. TriMas’ strategy is to accelerate growth through acquisitions, particularly in its Packaging and Aerospace platforms, backed by their prospects. Its strong product and process innovation will sustain long-term growth.
Over the past three years, TriMas completed six acquisitions and so far in 2023, the company has acquired Aarts Packaging and Weldmac Manufacturing. Aarts Packaging is an innovative, luxury packaging solutions provider for beauty and lifestyle brands, as well as for customers in the food and life sciences end markets. Weldmac Manufacturing Company is a leading designer and manufacturer of high-performance, complex metal fabricated components and assemblies for the aerospace, defense and space launch end markets.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, Astec Industries, Inc. ASTE and Terex Corporation TEX. WOR and ASTE 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 21% in the past six months.
Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $2.81 per share. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. ASTE’s shares have gained 18% in the last six months.
The Zacks Consensus Estimate for Terex’s 2023 earnings per share is pegged at $1.61. Estimates were unchanged in the last 60 days. It has a trailing four-quarter average earnings surprise of 27.1%. TEX has gained 2% in the past six months.
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