TriMas (TRS) Closes Omega Buyout, Fortifies Packaging Business
TriMas (TRS) completes its acquisition of Omega Plastics, the third addition to its packaging platform in two years.
TriMas Corporation TRS announced that it closed the acquisition of Omega Plastics, a manufacturer of medical device components, to grow its Packaging segment. The buyout also expands TriMas’ Pharmaceutical & Nutraceutical product offerings into additional medical applications, which is an attractive market for long-term growth.
Based in Clinton, MI, Omega is a private, family-owned company 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 clean room to provide its customers a faster product development cycle, from prototype development, testing and validation to short- and medium-run production and assembly.
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 vendor to leading healthcare companies.
TriMas plans to expand Omega’s production capacity, as required in order to meet its customers’ longer-term needs. It will leverage Omega’s advanced tool-making capabilities to add rapid prototyping to enhance TriMas Packaging’s speed-to-market advantage on innovation and new product designs.
TriMas’ Packaging segment earns revenues from the consumer products (comprised of the beauty and personal care, home care, food and beverage, pharmaceutical, and nutraceutical submarkets) and industrial markets. The segment accounted for 64% of its total sales in 2020. The segment reported sales of $409.7 million so far in fiscal 2021. Omega is expected to generate $18 million in revenues in fiscal 2021.
TriMas had announced that it entered an agreement for the Omega acquisition earlier this month along with the acquisition of Toronto, Canada-based TFI Aerospace. TFI Aerospace manufactures and supplies specialty fasteners for a wide range of applications, primarily in the aerospace end market, and is estimated to generate revenues of $6 million in fiscal 2021. It will help expand TriMas’ Aerospace segment’s fastener product lines.
These deals sync with TriMas’ strategy to accelerate growth through acquisitions, particularly in its Packaging and Aerospace platforms, backed by their highest long-term growth and performance profiles. To this end, the company pursues bolt-on 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 top-line results.
TriMas said after closing the acquisitions of Omega and TFI, its net leverage ratio would likely remain below 2.0X. The company’s strong balance sheet and track record of strong cash flow generation provides ample capacity and flexibility to fund organic growth initiatives and strategic acquisitions, while also returning capital to shareholders by purchasing its shares.
The Packaging segment had witnessed elevated demand for dispensing pumps and closure products that help fight the spread of germs amid the pandemic. It is, however, seeing a normalization of those trends lately. Nevertheless, demand will likely be supported by increased awareness regarding hygiene worldwide. Lower air travel and reduced commercial and business jet production have continued to impact the demand for TriMas’ products tied to commercial aircraft build rates since last year.
Meanwhile, TriMas has been witnessing higher material costs for resin-based raw materials and steel. This along with ongoing supply-chain headwinds is anticipated to hurt its margins in the near term.
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Shares of TriMas have gained 8.1% in the past year compared with the industry’s growth of 2.7%.
Zacks Rank & Stocks to Consider
TriMas carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Industrial Products sector are Greif, Inc. GEF, SPX Flow FLOW and Emerson Electric Co. EMR. While GEF and FLOW currently flaunt a Zacks Rank #1 (Strong Buy), EMR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Greif has an estimated earnings growth rate of 11.4% for the current year. In the past 30 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 2%.
In a year, the company’s shares have gained 21.5%. Greif has a trailing four-quarter earnings surprise of 16.8%, on average.
SPX Flow has an expected earnings growth rate of 102% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised upward by 1% in the past 30 days.
SPX Flow’s shares have risen 49.3% in a year’s time. FLOW has a trailing four-quarter earnings surprise of 40%, on average.
Emerson Electric has a projected earnings growth rate of 19.9% for 2021. The Zacks Consensus Estimate for current-year earnings has been revised upward by 1% in the past 30 days.
EMR’s shares have appreciated 12.3% in the past year. Emerson Electric has a trailing four-quarter earnings surprise of 10.7%, on average.
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