Trying to play the up-cycle in aerospace through the specialty alloy companies has been tricky, and in the case of Universal Stainless & Alloy Products (USAP)
that’s been complicated further by a fire-related production outage
that made a noticeable impact on third quarter production and financial
results. On top of that, the company continues to be challenged by
surcharge mismatches and challenging end-market conditions in multiple
key markets.
USAP shares have clearly been weak since my last update,
with at least some of that weakness tied to nervousness about whether
the 737 MAX delays would lead to inventory and order adjustments among
aerospace customers. USAP is a tiny, almost uncovered, company and it
operates in a challenging near-commodity industry, and end-market
turbulence is no help. I do think that the shares trade at much too wide
of a discount now, but given past challenges in out-earning its cost of
capital, investors shouldn’t fool themselves into thinking this is a
valuation layup.
Read the full article here:
Fire-Related Outages Sap Momentum At Universal Stainless & Alloy Products
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