TriMas (TRS) Down 8.1% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for TriMas (TRS). Shares have lost about 8.1% in that time frame, outperforming 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 Q4 Earnings Miss on Weak Industrial Demand

TriMas reported fourth-quarter 2019 adjusted earnings of 31 cents per share, which missed the Zacks Consensus Estimate of 39 cents. The bottom line also declined 9% from 34 cents reported in the prior-year quarter. This can be attributed to weaker-than-expected sales, less favorable mix and increased expedited freight costs.

Including one-time items, the company’s earnings per share of 31 cents, reflecting a decline of 9% from the year-ago figure of 34 cents.

The company’s revenues of $171 million lagged the Zacks Consensus Estimate of $227 million owing to weakness in the North American industrial end markets. However, the top line inched up 0.5% year over year, aided by continued strength of the aerospace fastener business and recent acquisitions.

Cost and Margins

Cost of sales rose 3% year over year to $127 million in the reported quarter. Gross profit declined 7% year over year to $44 million. Gross margin contracted 210 bps to 25.9%.

Selling, general and administrative expenses fell 5% year over year to $23 million. Adjusted operating profit declined 9% year over year to $21 million as impact of higher sales were offset by a less favorable product sales mix and higher freight and conversion costs. Adjusted operating margin contracted 120 bps year over year to 12.4% in the reported quarter.

Segment Performance

Packaging: Net sales improved 5% year over year to $94 million. Adjusted operating profit was $19.5 million in the reported quarter, down from $20.1 million in the prior-year quarter.

Aerospace: Net sales increased 7% year over year to $41 million from the prior-year quarter. The segment reported adjusted operating profit of $7.4 million, up 15% year over year.

Specialty Products: The segment’s revenues declined 15% year over year to $35.8 million. Adjusted operating profit plunged 51% year over year to $2.7 million.

Financial Performance

TriMas reported cash and cash equivalents of $172.5 million as of Dec 31, 2019, higher than $108 million as of Dec 31, 2018. The company generated $96 million of cash from operating activities during 2019 compared with $111 million in the prior year. As of Dec 31, 2019, net debt was approximately $122 million, down from $185 million as of Dec 31, 2018.

During the fourth quarter, TriMas repurchased 506,522 shares for $15.6 million, bringing the total for the year to 1,230,050 shares for $36.7 million. TriMas' board of directors had authorized an increase in the company's share repurchase program in November 2019, per which the company will purchase up to $150 million of its outstanding stock. As of Dec 31, 2019, $101.1 million remains available under the repurchase authorization.

2019 Results

TriMas reported adjusted earnings per share of $1.45 in 2019, down 4% from the prior year. Earnings missed the Zacks Consensus Estimate of $1.79. Sales were $724 million in 2019, up 3% from the previous year. The top line missed the Zacks Consensus Estimate of $924 million.

Guidance

The company’s earnings per share guidance for 2020 is at 1.50-$1.60. The mid-point of the guidance indicates year-over-year growth of 7%. The company anticipates sales growth of 9% to 11% compared with 2019, with organic sales growth at 1.5-2.5%.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months. The consensus estimate has shifted -18.75% due to these changes.

VGM Scores

At this time, TriMas has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

TriMas has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.