TriMas (TRS) Down 0.8% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for TriMas (TRS). Shares have lost about 0.8% 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 drivers.

TriMas Beats on Q1 Earnings, Suspends '20 Guidance

TriMas reported first-quarter 2020 adjusted earnings of 34 cents per share, which beat the Zacks Consensus Estimate of 31 cents. However, the bottom line declined 6% from 36 cents reported in the prior-year quarter. Impact of higher sales was offset by lower production inefficiencies related to the impact of the COVID-19 pandemic on production planning and operations.

Including one-time items, the company’s earnings per share came in at 30 cents, compared with the year-ago figure of 32 cents.

The company’s revenues of $183 million surpassed the Zacks Consensus Estimate of $177 million. The top line figure improved 5% year over year, driven by solid growth in the Packaging segment and recent acquisitions.

Costs & Margins

Cost of sales increased 8% year over year to $136 million in the reported quarter. Gross profit declined 1% year over year to $46 million. Gross margin contracted 160 bps to 25.4%.
 
Selling, general and administrative expenses fell 2% year over year to $26.5 million. Adjusted operating profit declined 2% year over year to around $22 million as impact of higher sales were offset by a less favorable product sales mix, production inefficiencies, and higher non-cash depreciation and stock compensation expenses. Adjusted operating margin contracted 90 bps year over year to 12% in the reported quarter.

Notably, TriMas’ facilities experienced varying degrees of production inefficiencies on account of temporary idling of production, lower staffing levels, increased absenteeism, reduced efficiency due to social distancing and other measures taken to ensure the safety of employees.

Segment Performance

Packaging: Net sales improved 13% year over year to $100 million. Adjusted operating profit was $18.6 million in the reported quarter, flat compared with the prior-year quarter.

Aerospace: Net sales increased 7% year over year to $49 million from the prior-year quarter. The segment reported adjusted operating profit of $6 million, down 3% year over year.
 
Specialty Products: The segment’s revenues declined 13% year over year to $34 million. Adjusted operating profit plunged 27% year over year to $3.4 million.

Financial Performance

TriMas reported cash and cash equivalents of $206 million as of Mar 31, 2020, higher than $172 million as of Dec 31, 2019. The company generated $3.4 million of cash from operating activities in first-quarter 2020 compared with $15 million in the prior-year quarter. As of Mar 31, 2020, net debt was approximately $239 million, down from $122 million as of Dec 31, 2019.

During the first quarter, TriMas repurchased 1,253,650 shares for $31.6 million. As of Mar 31, 2020, $169.5 million remains available under the company’s repurchase authorization. However, in March 2020, TriMas suspended share buybacks in a bid to conserve cash amid the COVID-19 crisis.

Major Developments

TriMas has completed the acquisition of RSA Engineered Products, a manufacturer of complex, highly-engineered products utilized in aerospace and defense applications. This buyout will enhance the Aerospace segment’s product line offering. The company has acquired the Rapak brand, including certain bag-in-box product lines and assets, from Liqui-Box.

Withdraws Guidance

Given that TriMas serves a diverse set of end markets, it will help the company to sail through this troubled times. TriMas’ Packaging group manufactures dispensers and closures, which are used 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 remains strong amid the pandemic.

Further, the Specialty Products group supplies steel cylinders, which are utilized for compressed gases in medical oxygen applications, have witnessed strong demand lately. However, ongoing weakness in end markets like commercial aerospace, oil & gas, remain headwinds.

Citing the uncertainty related to the COVID-19 pandemic, TriMas has withdrawn guidance for 2020. TriMas is managing production capacity to align with the current demand conditions and taking steps to lower costs.

How Have Estimates Been Moving Since Then?

Estimates revision followed a flat path over the past two months. The consensus estimate has shifted -10.61% due to these changes.

VGM Scores

At this time, TriMas has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

TriMas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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