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TriMas (TRS) Up 6.7% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·5 mins read

It has been about a month since the last earnings report for TriMas (TRS). Shares have added about 6.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is TriMas due for a pullback? 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 Earnings and Revenues Beat Estimates in Q2

TriMas reported second-quarter 2020 adjusted earnings of 43 cents per share, which beat the Zacks Consensus Estimate of 32 cents. Notably, the bottom line remained flat compared with the prior-year quarter. Although some end-markets remained challenged due to the impact of the coronavirus pandemic, strong sales in the Packaging group drove earnings in the quarter.

Including the impact of an accounting policy change and realignment charges, the company reported a loss per share of 36 cents, against the year-ago quarter’s earnings of 41 cents per share.

The company’s revenues of $200 million surpassed the Zacks Consensus Estimate of $193 million. The top line improved 4.6% year over year, driven by record sales in the Packaging segment and recent acquisitions. However, weak demand in certain businesses resulting from the effects of the COVID-19 pandemic and unfavorable currency exchange offset some of the gains.

Costs & Margins

Cost of sales increased 18% year over year to $162 million in the reported quarter. Gross profit slumped 31% year over year to $37 million. Gross margin contracted 950 basis points year over year to 18.7%.
 
Selling, general and administrative expenses soared 107% year over year to $55 million. Adjusted operating profit declined 2% year over year to around $27.5 million as impact of higher sales were offset by a less favorable product sales mix, production inefficiencies related to the pandemic, and higher non-cash depreciation and amortization. Adjusted operating margin contracted 90 basis points year over year to 13.8% in the reported quarter.

Segment Performance

Packaging: Net sales improved 24% year over year to $129 million. Adjusted operating profit was $27.2 million in the reported quarter, up 19% from the prior-year quarter.

Aerospace: Net sales declined 14% year over year to $43 million from the prior-year quarter. The segment reported adjusted operating profit of $4.3 million, down 43.5% year over year.
 
Specialty Products: The segment’s revenues declined 13% year over year to $28 million. Adjusted operating profit plunged 31% year over year to $3.8 million.

Financial Performance

TriMas ended second-quarter 2020 with $349.4 million of cash and aggregate availability under its revolving credit facility, $65.3 million of cash on hand. As of Jun 30, 2020, total debt was approximately $295 million, down from $445 million as of Mar 31, 2020. During the reported quarter, the company proactively repaid $150 million previously drawn on its revolving credit facility during the first quarter in light of the uncertainty surrounding the impact of COVID-19 and as a precautionary measure against any potential credit market tightening.

The company generated around $31 million of cash from operating activities in the first half of 2020 compared with $33 million in the prior-year comparable period. Additionally, during the timeframe, TriMas utilized $95.2 million for acquisitions and repurchased approximately $31.6 million of its outstanding common stock. The company did not repurchase any shares during the second quarter and as of Jun 30, 2020, $169.5 million remained available under its repurchase authorization.

Outlook

Citing the uncertainty related to the COVID-19 pandemic, TriMas had earlier withdrawn guidance for 2020. The Packaging segment’s sales is expected to go up 15-20% in the back half of 2020 driven by strong demand. While the Specialty Products segment is likely to witness a decrease of 15% to 25%, the Aerospace segment’s sales is anticipated to fall 20% to 30% in the second half of the year from the prior year levels.  Thus, total sales for TriMas is anticipated to be relatively flat for the back half of 2020 compared with the prior year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 20% due to these changes.

VGM Scores

Currently, TriMas has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise 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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