Why Is TriMas (TRS) Down 1.8% Since Last Earnings Report?

A month has gone by since the last earnings report for TriMas (TRS). Shares have lost about 1.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is TriMas due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

TriMas Q3 Earnings & Sales Top Estimates, View Up

 

TriMas Corporation delivered adjusted earnings of 48 cents per share in third-quarter 2018, up 23% from 39 cents reported in the prior-year period. The bottom line beat the Zacks Consensus Estimate of 46 cents. Higher sales level, improved operating performance and prior realignment actions offset the impact of higher material costs.

 

On a reported basis, TriMas reported earnings per share of 49 cents compared with 29 cents in third-quarter 2017.

 

TriMas generated revenues of $224 million in the third quarter, outpacing the Zacks Consensus Estimate of $219 million. The top-line figure also improved 7% year over year.

 

Cost and Margins

 

Cost of sales rose 8% year over year to $162 million in the second quarter. Gross profit increased 5% year over year to $62 million. Gross margin contracted 50 basis points (bps) to 27.6%. Selling, general and administrative expenses went up 4% year over year to $32 million. Adjusted operating profit improved 4% to $30 million from the prior-year quarter as favorable impact of volume increases was partially offset by higher commodity costs. Adjusted operating margin contracted 30 bps year over year to 13.5% in the third quarter.

 

Segment Performance

 

Packaging: Net sales increased 6% year over year to $95 million attributable to higher sales of health, beauty and home care, and industrial products, related to product introductions, continued growth in Asia. Adjusted operating profit declined 5% year over year to $22 million as the favorable impact of increased sales levels were offset by the higher material costs and a less favorable product sales mix.

 

Aerospace: Net sales inched up 1% to $49 million compared with the year-earlier quarter, as higher demand more than offset the impact of the decision to exit less profitable machined components.  The segment reported adjusted operating profit of $8 million, up 6% year over year as benefits from continued production efficiencies, higher sales levels and a more favorable product sales mix were partially offset by incremental costs and temporary inefficiencies related to negotiating and finalizing a revised collective bargaining agreement, which now extends to 2021, at one of the U.S. plants.

 

Specialty Products: The segment reported revenues of $79 million, an improvement of 12% from $71 million recorded in the prior-year quarter, driven by higher sales levels of all brands on account of refocused commercial efforts and increased end market demand.  Adjusted operating profit climbed 46% year over year to $8 million on higher sales levels and continued realignment actions which mitigated increased material costs.

 

Financial Performance

 

TriMas reported cash and cash equivalents of $79.6 million as of Sep 30, 2018, considerably up from $27.6 million as of Dec 31, 2017. The company generated $83 million of cash from operating activities during the nine-month period ended Sep 30, 2018, compared with $73 million reported in the comparable period last year. At the end of the reported quarter, net debt was approximately $214 million, down from $276 million as of Dec 31, 2017.

 

Guidance

 

TriMas raised full-year 2018 organic sales growth estimate to around 6% year over year from the previous guidance of around 5%. It also hiked earnings per share guidance to $1.72-$1.78 from the previous projection of $1.65-$1.75. Mid-point of the guidance reflects year-over-year increase of approximately 25%. Free cash flow in 2018 is expected to be greater than 120% of net income.

 

During the remainder of 2018, TriMas will continue to aggressively manage the effects of increased commodity costs, as well as the impact of tariffs, through commercial actions, supply-chain management, leveraging global manufacturing footprint, and continued management of its businesses under the TriMas Business Model.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, TriMas has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, TriMas has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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