TriMas Corporation TRS announced that it has completed the acquisition of Omega Plastics, a manufacturer of components for medical devices, in order to develop its Packaging segment. The takeover also expands TriMas’ pharmaceutical and nutraceutical offerings to additional medical applications, which is an attractive market for long-term growth.
Headquartered in Clinton, MI, Omega is a privately held, family-owned business that manufactures custom components and devices for diagnostic, drug delivery, and orthopedic medical applications as well as industrial application components. Omega leverages its core injection molding capabilities, ISO13485 certified injection molding facility, and ISO Class 8 cleanroom to provide its customers with a faster product development cycle, from prototype development, to testing and validation to production and assembly in the short and medium term.
With its medical components currently used in drug delivery, including consumable intravenous applications, as well as diagnostic testing and orthopedic applications, Omega is an approved supplier to major healthcare companies.
TriMas plans to expand Omega’s production capacity, as needed, to meet the longer-term needs of its customers. It will leverage Omega’s advanced tool-making capabilities to add rapid prototyping to enhance TriMas Packaging’s speed-to-market advantage in innovation and new product design.
The Packaging segment of TriMas derives revenue from consumer products (comprising the beauty and personal care, home care, food and beverage, pharmaceuticals and nutraceuticals submarkets) and industrial markets . The segment accounted for 64% of its total sales in 2020. The segment has reported sales of $ 409.7 million so far in fiscal 2021. Omega is expected to generate $ 18 million in revenue during fiscal year 2021.
TriMas had announced that it had reached an agreement to acquire Omega earlier this month as well as the acquisition of TFI Aerospace, based in Toronto, Canada. TFI Aerospace manufactures and supplies specialty fasteners for a wide range of applications, primarily in the aerospace end-market, and is expected to generate revenues of $ 6 million in fiscal 2021. This will help expand the ranges of fastening products from the Aerospace segment of TriMas.
These agreements are in line with TriMas’ strategy to accelerate growth through acquisitions, particularly in its packaging and aerospace platforms, supported by their highest long-term growth and performance profiles. . To this end, the Company pursues targeted acquisitions and acquires another industry participant or adjacent product lines to expand its existing product offerings, customer base, end markets and geographic presence. In 2020, TriMas completed three acquisitions, RSA Engineered Products (in aerospace), and Affaba & Ferrari and Rapak (both in packaging), which will drive its main results.
TriMas said that after the Omega and TFI acquisitions close, its net leverage ratio will likely remain below 2.0X. The company’s strong balance sheet and track record of strong cash flow generation provides sufficient capacity and flexibility to fund organic growth initiatives and strategic acquisitions, while returning capital to shareholders by purchasing its shares.
The Packaging segment had seen high demand for dispensing pumps and closure products that help fight the spread of germs amid the pandemic. However, we are witnessing a normalization of these trends lately. Nonetheless, demand will likely be supported by increased hygiene awareness around the world. Declining air travel and reduced production of commercial and business aircraft continued to impact demand for TriMas’ products linked to commercial aircraft construction rates since last year.
During this time, TriMas has witnessed an increase in the costs of resin-based raw materials and steel. This, along with persistent headwinds in the supply chain, should hurt its margins in the near term.
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TriMas shares have gained 8.1% over the past year compared to industry2.7% growth.
Zacks rank and actions to consider
TriMas wears a rank 4 of Zacks (sale).
Some better ranked stocks in the industrials sector are Greif, Inc. FEM, SPX stream FLOWS and Emerson Electric Co. DME. While GEF and FLOW currently display a Zacks # 1 (strong buy) rank, EMR carries a Zacks # 2 (buy) rank. You can see The full list of today’s Zacks # 1 Rank stocks here.
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SPX Flow has an expected earnings growth rate of 102% for the current year. Zacks’ consensus estimate for current year earnings has been revised up 1% in the past 30 days.
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Emerson Electric has a projected profit growth rate of 19.9% for 2021. Zacks’ consensus estimate for current year earnings has been revised up 1% in the past 30 days.
EMR shares have appreciated 12.3% over the past year. Emerson Electric has a surprise profit for the last four quarters of 10.7%, on average.
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