My Own Analyst

HAYN

Haynes Intl had an ok quarter against expectations, but the outlook is very weak.  Lots of pricing pressure.  The only good thing is that the backlog remains reasonably robust.  I guess the other good thing is that the stock is pretty low.  The call is tomorrow.  I should just have tobacco stocks right now...

Question on ANV

ANV is getting hammered on a downgrade today. I don't have access to the piece or even a summary of the rationale, so I am a bit hesitant to opine.  The stock is very oversold and printed a nominal 52-week low before bouncing.  I continue to like the name based on what I have read.  Having recently studied NEM in detail, I have a strong appreciation for the domestic focus on ANV.  The earnings estimates for 2014 continue to come down, but suggest massive growth (2.65 is up 90% from 2013).  This is a high-beta name in an out-of-favor sector - these are both understatements.  

Everyone is Downgrading This Stock

ALB has had quite a run.  They reported a strong quarter yesterday, but the guidance was not so great.  After a year of flat earnings, they are projecting just "0-6%" EPS growth for 2013.  The way the math works, the actual 2013 estimate comes down just marginally.  You can see how the guidance, which came out on the call, hurt the stock after a nice open:

My one-year target was 73 (13 PE), so it's not too exciting on the surface, but I think this is one that could really surprise to the upside.  In fact, I expect that a little bit of better visibility could lead to a 90 target (15PE on $6) - I am just not quite there.  I am going to raise it to 78.50 for now (14PE).  The company has very little net debt - this could be an opportunity, whether acquisition or share repurchases.

I often like when everyone is downgrading a stock for a potential contrarian entry (four today and one yesterday), but we need to see a more substantive retreat.  Put this one on the radar for 61.50-62 as an entry.  I think that's a great spot technically as well as a reasonable valuation.  

HAYN Pre-Announces

HAYN will be down this morning as sales of $114mm are for its Q1 are way below the $132mm consensus.  It looks like EPS could be slightly below .50 based on $5.5-$6mm net income (12.3mm shares, so .45 on the low end).

This follows several quarters of a good mix in the business masking a stalled backlog.  Based on the fact that $18mm sales is leading to only a $2.5mm reduction in net income suggests that what happened was their low margin biz which tends to be more volatile was weak.  

This wasn't explicity stated.  Here is what the CEO said:

Mark Comerford, President and Chief Executive Officer, said, "During our first quarter, our customers exercised increased caution in making purchases, which we attribute to ongoing uncertain economic conditions. As a result, earnings for the quarter ended December 31, 2012 will be lower than previously anticipated and we expect earnings will be uncertain in the near future due to lack of visibility. We continue to believe in the long-term growth potential of the aerospace, land-based gas turbine and chemical processing markets and we will continue to implement our capital spending projects in line with our plans to meet the growth requirements of those target markets."

We had trimmed the name in Top 20 and it is about a 3% position.  I still like the company's prospects, but it is taking a bit longer than I had hoped to reach my long-term target of 80-100.  This is a different number than my one-year target, which is 78.50 but likely to drop by $3 or so.  

From a trading perspective, 49-50 would be a good entry technically.  We had trimmed 51-52 in Mid-December, and the market has advanced since then.  Here is what we did on the other side:

 

HAYN

First, sorry for the absence - huge technical difficulties today (on-going still).  Let's just say short CMCSA!

HAYN report was ok.  Sales were above expectations, margins weaker due to some near-term pricing issues.  The stock was weak on backlog deterioration continuing.  I think that the company is a great long-term play if you think new planes (wide-body as well as narrow-body) will continue to be built and that natural gas prices will remain low.  They did a good job of explaining the near-term challenges, and I would suspect that long-term investors will stick with this one.  

CE Analyst Day

I attended the Celanese "Technology Day" today.  I was hoping to get more upbeat on their U.S. Ethanol opportunity, but that looks like a longer-term driver due to political constraints.  On the other hand, turning coal to ethanol works real well in China and Indonesia, so it remains an exciting intermediate-term driver.

My biggest takeaway is that this is a company that goes way beyond commodity chemicals, as I expected.  The company seems to have two competitive advangtages:  Technology and customer collaboration.  Surely, these are overstated to some degree as being unique - Albemarle says the same thing.  Ultimately, this is an improving industry in general - these specialty chemical companies are getting their products designed into their customer products, which smooths earnings over time and should ultimately boost the value.  The last thing you want to do is buy a stock at 9 PE and find out it's really 20 PE!

Sometimes, it's the Q&A at the end where you learn the most.  I learned a lot speaking with their employees who explained how the company's competitive position is improving and how the company is growing and changing, and and I also enjoyed listening to management to get a better understanding of what the real opportunities might be.  For instance, I now know the difference between EVA and VAE (it's the amount of vinyl acetate relative to ethylene).  The Q&A at the end, though, told me what concerns investors.  It seems one of the big issues has been the debt level, but they have worked this down and will continue to do so.  More bothersome, it seems, is the fact that the company has several JVs, leading to a lack of transparency (the net profits are realized, but analysts don't get to look under the hood).

I think CE is very attractive and a good value.  I may add it to my watchlist, though I already have ALB, which is not a competitor but quite a similar investment.  I think that it can trade in a decent environment at 9X EV/EBITDA, perhaps more.  This suggests that the future price performance will depend on earnings growth to about the same degree as valuation changes, as CE trades near 7.5X.  Based on the numbers getting hit (i.e. the analysts are right), the stock has 30-35% upside, so not bad.  The real opportunity is that the analysts are more conservative than the company.  So, I don't have a definitive call here, but I wanted to pass along how I spent my morning.  Now, I need to catch up - APOG call must have gone well, and the MASI Investor Day too...

Titanium Metals Beats on EPS

TIE is out this morning with a small beat on EPS and a small miss on sales.  Overall, results were pretty flat from a year ago.  I still would like to convert this position to HAYN, but I will wait until at least tomorrow.  There wasn't much in the press release, and they don't hold conference calls.  I will need to see the 10-Q, which should be filed later today.

Insight on TIE

TIE's closest peer, RTI, reported a good quarter today and spoke very optimistically about the balance of the year.  Sales were about 8% above the consensus.

Yesterday, CRS reported.  This one is only somewhat similar.  In fact, CRS does some work for TIE.  The stock was strong in a weak tape.  The company called out titanium fasteners and reported very solid demand in aerospace (as did RTI) as well as energy.

I think that the reports bode well for HAYN too, which reports on Friday...

TIE Could Fly

Titanium Metals (TIE) hasn't yet reported.  Annoyingly, they don't host a call and don't say when they are reporting.  My guess is that they could report today, maybe Monday.

In the meantime, competitor RTI blew away the consensus - sales rose 35% (22% expected) on a surge in volume with pricing down slightly per pound and backlog growing 70%.  EPS of .19 were way ahead of the .06 consensus.  Best quarter since late 2008.  TIE is expected to grow sales 9%. 

BCPC Question

Igor wants an update on BCPC.  My client who owns the stock caught the call - I haven't.  Based on his comments, this was not an exciting quarter, but it was positive that the problems appear to be stabilizing or improving.  The fracking volumes rebounded sharply  as the company cut prices on choline.  One of the other problems persisted but didn't worsen.  So, it sounds like the quarter wasn't a game-changer in any way, but the long-term outlook remains positive and the stock should hopefully continue to recover some of the decline in value over the coming quarters as it works through slower short-term growth.