Zacks_Analysts' Blog : Titanium Metals Beats Consensus - Analyst Blog

Titanium Metals Corporation (TIE) reported net earnings of $28.9 million or 16 cents per share in the first quarter of 2011 surpassing the Zacks Consensus Estimate of 14 cents and increasing from the prior-year earnings of $16.7 million or 9 cents per share.

Revenues

Quarterly revenues of $252 million increased 15.9% year over year and beat the Zacks Consensus Estimate of $232 million. Increased sales were backed by increase in product volumes and higher average selling prices. Improved demand for titanium products in the commercial aerospace and industrial sectors led to the increase in volumes.

Costs and Margins

Cost of sales jumped by 13.4% over the prior-year quarter to $203.8 million. As a percentage of sales, costs plunged to 80.9% in the reported quarter from 82.6% in the year ago quarter. For the first quarter of 2011, gross margin was $48.2 million compared with $37.8 million for the first quarter of 2010, reflecting higher sales volume and the related efficiencies resulting from greater utilization of its manufacturing capacity, as demand continues to improve.

Selling, general, administrative and general expense also increased 8.8% year over year to $14.8 million.

Operating income in the reported quarter increased significantly by 86% to $45 million. Increased manufacturing activity, together with Titanium’s ongoing focus on cost control, contributed to improved operating income versus the prior year.

Shipments

Melted product shipments of 1,495 metric tons increased 31.1% from last year’s shipments of 1,140 metric tons. Average selling price, also jumped by 15.4% year over year to $22.80 per kilogram. Milled products shipments of 3,910 metric tons also surged 15.2% from 3,395 metric tons and product prices inched up to $52.05 per kilogram from $51.85 per kilogram in the first quarter of 2010.

Outlook

Titanium Metals faced increased demand in the industrial sector as infrastructure and chemical projects were reinvigorated by the global economic recovery. The company expects this trend to continue in 2011. The company also expects to drive efficiency through process technology and cost reduction initiatives.

Delaware-based Titanium Metals is the leading worldwide producer of titanium metal products.

Titanium Metals has been successful over the last several years in establishing significant flexibility and cost advantages in its entire manufacturing process. The company’s fiscal discipline and industry experience have allowed it to manage its production rates and costs effectively while investing capital conservatively and maintaining a strong, debt-free balance sheet.  The company’s financial strength and operating flexibility position it to take advantage of opportunities to strengthen and expand its presence in key markets.

The company competes with Allegheny Technologies Inc. (ATI) and RTI International Metals, Inc. (RTI).

We maintain our Neutral recommendation on Titanium. Currently, it holds a Zacks #3 Rank (Hold).