Wednesday, August 28, 2019

Universal Stainless & Alloy Products Looking For Aerospace And Premium Offerings To Drive Leverage

The shares of Universal Stainless & Alloy Products (USAP) have done well since I last wrote on the company. Not only is the greater than 25% move in the stock price strong on its own, but it is also quite a bit better than other nickel alloy rivals like Carpenter (CRS) (up 10%), Haynes (HAYN), and Allegheny (ATI) over the same time period. Better still, the aerospace market opportunity continues to improve, backlog continues to build, and a collection of adverse margin headwinds shouldn’t repeat.

While I thought USAP was undervalued back in May, I was concerned about the company’s challenges in achieving long-hoped for utilization improvement and margin leverage. Those concerns are still in play, but backlog growth speaks to suppliers ramping up ahead of expected production build growth at Boeing (BA) and other aerospace OEMs. I still think USAP shares look undervalued, though, and I think the odds are improving that USAP is going to exit 2019 with more apparent business/earnings momentum and quite possibly a healthier multiple as well.

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Universal Stainless & Alloy Products Looking For Aerospace And Premium Offerings To Drive Leverage

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