Zacks_Analysts' Blog : Titanium Metals Profits In-Line - Analyst Blog

Titanium Metals Corporation (TIE) reported net earnings of $25.0 million or 14 cents per share in the third quarter of 2011, and increased from the prior-year earnings of $21.5 million or 12 cents per share.

Excluding the impact of non-cash deferred income tax charge of 1 cent per diluted share, earnings were $0.15 per share and  in line with the Zacks Consensus Estimate . 

Revenues

Quarterly revenues of $262.3 million increased 24.8% year over year, beating the Zacks Consensus Estimate of $262 million. Increased sales were driven by a rise in sales volumes for both melted and mill products, primarily reflecting improved demand for titanium products in the commercial aerospace sector as well as increased shipments of industrial products.

Costs and Margins

Cost of sales increased 29.1% over the prior-year quarter to $207.4 million. As a percentage of sales, costs increased 79.0% in the reported quarter from 76.4% in the year-ago quarter. For the third quarter of 2011, gross profit was $55.1 million compared with $49.6 million in the third quarter of 2010, reflecting higher sales volume.

Selling, general, and administrative expense also increased 25.7% year over year to $17.1 million.

Operating income in the reported quarter increased by 7% to $38.5 million. Higher sales volume, including the impact of the increase in sales of industrial products contributed to improved operating income versus the prior year.

Shipments

Melted product shipments of 1,565 metric tons increased 18.1% from last year’s shipments of 1,325 metric tons. Average selling price moved up from $20.90 per kilogram to $22.00 per kilogram. Milled products shipments of 3,955 metric tons also surged 29.7% from 3,050 metric tons and product prices moved down to $52.15 per kilogram from $55.25 per kilogram in the third quarter of 2010.

Outlook

Titanium Metals saw increased demand in both melted and mill products through the first three quarters of the year. The company’s commercial aerospace customers also significantly increased their purchasing activity due to build rates for legacy and next generation models and replenishment and growth of inventory to support the anticipated increase in future aircraft deliveries. 

The company expects demand to remain strong for the remainder of the year and into 2012 in line with the industry’s estimated timelines for fleet replacement and aircraft production. 

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).