Titanium Metals (TIE) is poised to rebound following encountering a near meltdown brought on by the recession and considerable delays by Boeing in improvement of their 787 Dreamliner. Deliveries of other aircraft will maximize the demand from customers for titanium for the future five several years.
In July 2009, The Airline Observe, a major aerospace publication, issued its semi-once-a-year forecast for commercial aircraft deliveries. Aggregate once-a-year deliveries for the two Boeing and Airbus are envisioned to attain file quantities of aircraft during each individual year from 2009 by 2013 (totaling at the very least 960 aircraft deliveries each individual year during the period). Forecasted deliveries for twin-aisle aircraft by 2013 have declined four% from one,450 to one,390 given that The Airline Monitor’s January 2009 forecast largely owing to production delays on the Boeing 787. Adjustments to production schedules for sure other commercial aircraft resulted in a 22% maximize in forecasted deliveries of Boeing and Airbus single-aisle aircraft by 2013.
Based mostly on the will increase in range of aircraft there ought to be a web maximize in envisioned titanium intake above the future five several years as opposed to The Airline Monitor’s January 2009 forecast for titanium intake. Beyond 2013, projected aircraft deliveries keep on being sturdy as fuel effectiveness and growth of the world-wide fleet in producing nations, this kind of as Asia, supply crucial drivers of extensive-expression demand from customers for titanium inside of the commercial aerospace market.
VSMPO-Avisma from Russia has 31% of the milled titanium current market followed by TIE with eighteen%, Allegheny with sixteen% and RTI with seven%.
The Company’s web revenue ended up $205.seven million for the next quarter of 2009 as opposed to $297.3 million for the next quarter of 2008, a lower of 31% principally resulting from reduce volumes and ordinary providing price ranges. Typical providing price ranges are reduce owing to competitive pricing pressures resulting from reduce demand from customers for titanium solutions and declines in raw materials costs, largely titanium scrap, which have contributed to reduce providing price ranges for solutions below extensive-expression customer agreements, in section owing to raw materials indexed pricing adjustments included in sure of these agreements.
Operating income of $fifteen.6 million for the next quarter of 2009 was down from $68.8 million for the similar period in 2008, largely reflecting the results of reduce volumes and ordinary providing price ranges for melted and mill solutions. In addition, the favorable impacts from declining raw materials costs, largely titanium scrap, on the Company’s gross margins ended up offset by greater for every-unit overhead costs resulting from reduce production volumes.
Titanium Metals claimed web income attributable to common stockholders of $8.6 million, or $.05 for every diluted share, for the quarter ended June thirty, 2009, as opposed to $forty seven.3 million, or $.26 for every diluted share, for the quarter ended June thirty, 2008.
Basic Evaluation Basic Overview Stock Overview Chance Things Sector Industrial – Steel Producing Beta one.five Dividend Yield one.37% Insider Possession 52.89% Earnings Announcement around two-twelve Nov 2009 just before the current market opens Institutional Possession twenty five.8% Price Analysis Growth Analysis Return on Cash employed thirteen.five% PE Ratio sixteen.6 Earnings Yield 9.8% PEG Ratio n/a Free of charge Money Movement Margin fifteen.two% Enterprise Price/Free of charge Money Movement twelve Free of charge Money Movement Yield 6.8% Quarterly Revenue Growth (yoy) -thirty.8% Cockroaches none Quarterly Revenue Forecast (yoy) -40.3%
Titanium Metals is encountering a significant drop in revenue that has an effect on all related fundamental steps. Even so, the company’s ability to crank out excessive cost-free income stream is considerable. Their cost-free income stream margin of fifteen.two% and their cost-free income stream yield of 6.8% are the two quite fantastic in standard moments. The business has delayed a number of money enhancement tasks to assist preserve income. Even so, they are benefiting from previously money courses that assist to reduce the company’s functioning cost.
The small Return on Cash Used displays reduce revenue and Earnings Right before Fascination and Taxes (EBIT). Even so, the significant Earnings Yield suggests the current market is valuing TIE at a fairly small value for the EBIT it is making. This is an indication that any rebound in revenue will have a favourable impact on the value of the shares.
Titanium Metals advancement is held again by their falling revenues. Their PE ratio displays this. Their Enterprise Price to Free of charge Money Movement ratio suggests the company’s price has the prospective to expand appreciably when revenue advancement turns up.
Once manufacture of the new airliners from Boeing and Airbus start out in earnest, TIE ought to see their revenue expand and with it their ability to crank out cost-free income stream. Until eventually then TIE is probably to working experience volatility in its share value as investors check out to anticipate when these essential events begin to have an impact on the business. Remember, the value of a company’s stock tends to rise in anticipation of a considerable improve in the company’s fundamentals, ordinarily by six months or so.
We could see a pick up in revenue after Boeing demonstrates it is acquiring close to getting in a position to create the 787. In addition, as the financial state recovers, airlines will begin to switch their less efficient aircraft with much more fuel efficient, lighter bodyweight planes that have much more titanium. Until eventually then TIE will keep on being at a small value.
Key Drivers and Boundaries
Titanium Metals is getting driven by:
- The developing demand from customers for significant effectiveness supplies for aircraft (Boeing, Airbus and military) as properly use of titanium in other solutions this kind of as health-related employs.
- They are the only titanium business with operations in the U.S and Europe, the two really essential markets for titanium.
Titanium Metals has produced essential obstacles by:
- Expanding potential in the essential components of the manufacture of titanium supplies.
- Their eighteen% current market share that is the premier outdoors of Russia.
Titanium is inclined to a gradual down in shelling out inside of their markets, in particular the United States, as properly as a gradual down in money shelling out by their clients throughout the world. Continuing delays in the development of crucial airliners this kind of as Boeing’s 787 Dreamliner will negatively impact TIE’s revenue.
Administration at Titanium Metals does not give steering.
Roughly 36% of the company’s web revenue originate in Europe the place they have comprehensive manufacturing and revenue operations.
As of July 29, 2009, the business had around $fifty eight.one million accessible for repurchase of our common stock.
The Bottom Line
Sooner or later Titanium Metals will reward from the developing demand from customers for titanium supplies for airline, military and other employs. The latest troubles Boeing is obtaining with their production of the 787 Dreamliner has delayed demand from customers for TIE’s solutions. Now that it seems like Boeing has ironed out their production troubles and the financial state commences to get well, airlines will switch their older aircraft for much more fuel-efficient planes that have much more titanium.
Boeing is scheduled to fly the first 787 just before the close of 2009. If that arrives off as envisioned, then the first deliveries of the 787 will start out in late 2010. This indicates Boeing will start out to buy much more titanium in the early section of 2010 to meet their ramp up of production. Look to purchase on dips in the value in anticipation of developing demand from customers for titanium.