Northwest Pipe Company (NWPX) Hits Fresh High: Is There Still Room to Run?

The Zacks Metal Products - Procurement and Fabrication industry is poised to gain from diverse end-market demand. As inflation continues to ease, order volumes are anticipated to rise. Signs of improving supply-chain conditions add to the positive outlook.

Players like Norsk Hydro ASA NHYDY, ESAB Corporation ESAB, Century Aluminum CENX and Northwest Pipe Company NWPX have witnessed order growth and delivered improved performances. Solid end-market demand, efforts to gain market share and investment in automation should aid growth for these companies. Their focus on cost management and improving efficiency will boost margins.

About the Industry

The Zacks Metal Products - Procurement and Fabrication industry primarily comprises metal processing and fabrication service providers that transform metal into metal parts, machinery or components used across various other industries. Their processes include forging, stamping, bending, forming and machining, which are used to shape individual pieces of metal, and welding and assembling to join parts. The companies either use one of these processes or a combination of these. The most common raw materials utilized by metal fabrication companies include plate metal, formed or expanded metal, tube stock, welding wire or rod, and casting. The industry players serve an array of markets, including construction, mining, aerospace and defense, automotive, agriculture, oil and gas, electronics/electrical components, industrial equipment, and general consumer.

What's Shaping the Future of Metal Products - Procurement and Fabrication Industry

Expected Pickup in Order Levels as Inflationary Pressures Abate: Per the Fed’s latest industrial production report, the aggregate production of fabricated metal products in the United States edged down 0.2% in October 2024, same as in September. It marks an improvement from the 1.1% decline in August. Overall, industrial production decreased 0.3% in October after declining 0.5% in September. Hurricane Milton and the lingering effects of Hurricane Helene, and a strike at Boeing led to the decline. The Institute for Supply Management’s Manufacturing Index has been in the contraction territory for seven consecutive months, with a reading of 46.5% in October. Orders have been impacted, reflecting lower customer spending amid inflationary trends. Even though the New Orders index contracted for the seventh consecutive month, it was 47.1% in October, a tad higher than September’s 46.1%. With the inflation metrics showing signs of slowing down, orders will pick up. The industry was affected by supply-chain issues, although some improvement has been noted recently. Once the situation normalizes, demand in the metal Products - Procurement and Fabrication industry’s diverse end markets will drive growth.

Pricing Actions to Combat High Costs: The industry had been experiencing significant inflation levels, including higher prices for labor, freight and fuel. The companies are witnessing labor shortages for some positions and incurring steep labor costs to meet demand. The industry players are focusing on pricing actions, cost-cutting measures, efforts to improve productivity and efficiency, and the diversification of supplier bases to mitigate some of these headwinds.

Automation & End-Market Growth to Act as Catalysts: The industry’s customer-focused approach to providing cost-effective technical solutions and automation to increase efficiency and lower labor costs bodes well. Also, focus on developing the latest and innovative products should drive growth in the days ahead. Growth in the end-use sectors, such as manufacturing, aerospace and automotive, is anticipated to benefit the metal fabrication market over the next few years. Developing countries hold promise due to rapid industrialization. This, in turn, is likely to create demand.

Zacks Industry Rank Indicates Bright Prospects

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates upbeat prospects in the near term. The Zacks Metal Products - Procurement and Fabrication industry, which is a 12-stock group within the broader Industrial Products Sector, currently carries a Zacks Industry Rank #82, which places it at the top 33% of 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Before we present a few stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock-market performance and valuation picture.

Industry Versus Broader Sector

The Zacks Metal Products - Procurement and Fabrication industry has outperformed its sector and the Zacks S&P 500 composite over the past year.

Over this period, the industry has gained 66% compared with the sector’s growth of 30%. Meanwhile, the Zacks S&P 500 composite has also risen 30%.

One-Year Price Performance

TriMas Corporation’s TRS shares gained 10% since it reported its third-quarter 2024 earnings on Nov. 4. TriMas reported third-quarter 2024 adjusted earnings per share (EPS) of 43 cents (including non-cash compensation expenses), which missed the Zacks Consensus Estimate of 57 cents. The bottom line declined 31.7% from the prior-year quarter due to weak demand in the Specialty Products segment and delayed shipments due to a 10-week work stoppage at an aerospace location.

Despite weaker-than-expected earnings, TRS shares were buoyed by some positive developments. While sales declined in the Specialty Products segment, it achieved a sequential 660 basis point margin improvement attributed to the cost reduction actions implemented in the second quarter of 2024. TriMas noted increased quoting and bookings for the segment, indicating a recovery in its top line in 2025, which, combined with the cost containment, will likely result in improved margins for the segment next year. Also, in the packaging segment, the food and beverage end markets posted positive year-over-year growth for the first time in 2024. The recovery in these key markets bodes well for the segment.

TriMas Corporation Price, Consensus and EPS Surprise

TriMas Corporation price-consensus-eps-surprise-chart | TriMas Corporation Quote

TriMas also inked a deal to acquire Germany-based GMT Aerospace, a manufacturer of tie rods used in a range of structural aerospace applications. The acquisition, expected to close in the first quarter of 2025, will add the first manufacturing location in Europe for the aerospace segment. GMT Aerospace’ annualized sales are approximately EUR20 million.

Including the impacts of one-time items, the company reported an EPS of 6 cents compared with the year-ago quarter's 40 cents.

The company's revenues decreased 2.5% year over year to $229 million. Organic sales growth in packaging and aerospace product lines was offset by lower market demand in the Specialty Products segment. Overall, organic sales fell 2.3% in the quarter. The top line missed the Zacks Consensus Estimate of $241 million.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

TriMas’ Q3 Costs & Margins

The cost of sales fell 1% year over year to $178 million in the reported quarter. Gross profit declined 7.6% year over year to $51.7 million. The gross margin was 22.5% compared with 23.8% in the prior-year quarter.

Selling, general and administrative expenses rose 37.7% year over year to $44.5 million. Adjusted operating profit declined 18.7% year over year to $23 million. The adjusted operating margin contracted to 9.9% from the prior-year quarter’s 11.8%.

TRS Q3 Segment Performances

Packaging: Net sales came in at $130 million compared with the year-ago quarter’s $117 million. The upside was driven by organic growth within the beauty & personal care, food & beverage, industrial and home care end markets.

The figure was higher than our estimate of $126 million. Organic sales rose 12.3% year over year. Adjusted operating profit fell 2.5% year over year to $19 million in the reported quarter. We had projected the segment’s adjusted operating profit at $19 million.

Aerospace: Net sales increased 4.8% year over year to $71 million, attributed to stronger demand. The figure missed our estimate of $73 million. Organic sales rose 4.8%. The segment’s results in the quarter were impacted by delayed shipments from a 10-week work stoppage at one of its facilities, which has since been resolved.

The segment reported an adjusted operating profit of $9 million, up 4.6% year over year. We had projected the segment’s adjusted operating profit at $9 million.

Specialty Products: The segment's revenues decreased 44.8% year over year to $28 million due to lower demand. Revenues were lower than our estimate of $44 million. Operating profit fell 77.6% year over year to $2.4 million. We had projected the segment’s adjusted operating profit at $6.4 million.

TriMas’ Q3 Cash Flow & Balance Sheet Updates

In the first nine months of 2024, TriMas repurchased approximately 771,067 of its outstanding common stock for $19.3 million. The company generated $22 million of adjusted cash flow from operations in the quarter under review compared with $31 million in the prior-year quarter.

TRS ended the quarter with $26.9 million of cash on hand compared with $34.8 million reported at the end of 2023. The company had $210.2 million of cash and available borrowing capacity under its revolving credit facility. As of Sept. 30, 2024, the total debt was $410 million compared with $396 million as of Dec. 31, 2023.

TRS’ 2024 Guidance

TriMas continues to expect an adjusted EPS of $1.70-$1.90 for 2024.

TriMas’ Price Performance

TRS shares have gained 16.8% in the past year compared with the industry’s 84.5% growth.

TRS’ Zacks Rank

TriMas carries a Zacks Rank #5 (Strong Sell) at present.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

TriMas’ Peer Performances

Kaiser Aluminum KALU reported third-quarter adjusted EPS of 51 cents, which missed the Zacks Consensus Estimate of 67 cents. The bottom-line figure increased 11% from the year-ago quarter.

Net sales of KALU rose 0.5% year over year to $748 million but missed the consensus estimate of $773 million.

Northwest Pipe Co. NWPX came out with third-quarter earnings of $1.02 per share, beating the Zacks Consensus Estimate of 85 cents per share. This compares with earnings of 58 cents per share a year ago.

Northwest Pipe posted revenues of $130 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate of $127 million. The top line increased 9.2% year over year.

ESAB Corporation ESAB came out with third-quarter earnings of $1.25 per share, beating the Zacks Consensus Estimate of $ 1.12 per share. This compares with earnings of $1.08 per share a year ago.

ESAB posted revenues of $636 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate of $629 million. The top line fell 6.6% year over year.

Zacks Investment Research

For those looking to find strong Industrial Products stocks, it is prudent to search for companies in the group that are outperforming their peers. Has Mitsubishi Heavy Industries, Ltd. (MHVYF) been one of those stocks this year? By taking a look at the stock's year-to-date performance in comparison to its Industrial Products peers, we might be able to answer that question.

Mitsubishi Heavy Industries, Ltd. is a member of our Industrial Products group, which includes 213 different companies and currently sits at #14 in the Zacks Sector Rank. The Zacks Sector Rank includes 16 different groups and is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors.

The Zacks Rank emphasizes earnings estimates and estimate revisions to find stocks with improving earnings outlooks. This system has a long record of success, and these stocks tend to be on track to beat the market over the next one to three months. Mitsubishi Heavy Industries, Ltd. is currently sporting a Zacks Rank of #2 (Buy).

Over the past 90 days, the Zacks Consensus Estimate for MHVYF's full-year earnings has moved 1.7% higher. This is a sign of improving analyst sentiment and a positive earnings outlook trend.

Our latest available data shows that MHVYF has returned about 157% since the start of the calendar year. At the same time, Industrial Products stocks have gained an average of 17.7%. As we can see, Mitsubishi Heavy Industries, Ltd. is performing better than its sector in the calendar year.

Northwest Pipe Co. (NWPX) is another Industrial Products stock that has outperformed the sector so far this year. Since the beginning of the year, the stock has returned 77%.

The consensus estimate for Northwest Pipe Co.'s current year EPS has increased 12.1% over the past three months. The stock currently has a Zacks Rank #1 (Strong Buy).

Looking more specifically, Mitsubishi Heavy Industries, Ltd. belongs to the Manufacturing - General Industrial industry, a group that includes 42 individual stocks and currently sits at #143 in the Zacks Industry Rank. Stocks in this group have gained about 19.9% so far this year, so MHVYF is performing better this group in terms of year-to-date returns.

On the other hand, Northwest Pipe Co. belongs to the Metal Products - Procurement and Fabrication industry. This 11-stock industry is currently ranked #151. The industry has moved +54.7% year to date.

Going forward, investors interested in Industrial Products stocks should continue to pay close attention to Mitsubishi Heavy Industries, Ltd. and Northwest Pipe Co. as they could maintain their solid performance.

Zacks Investment Research