Shiloh Q2 Earnings Lag Ests; To Acquire FMS - Analyst Blog

Shiloh Industries Inc. SHLO reported impressive results for fiscal second-quarter 2014 (ended Apr 30, 2014). Earnings came in at 47 cents per share, reflecting an increase of 9.3% year over year. However, the bottom-line result lagged the Zacks Consensus Estimate of 49 cents per share.  

Revenues

Shiloh Industries generated net revenue of $209.0 million, up 14.7% year over year and above the Zacks Consensus Estimate of $207 million. The top-line growth was driven by new product offerings, market share gains and acquisitions.

Margins

Cost of sales increased by 15.5% year over year and represented 90% of total revenue, up 60 basis points (bps) compared with the year-ago quarter. Selling, general and administrative expenses were 5.4% of total revenue versus 4.3% recorded in the year-ago quarter.

Operating income was $12.7 million, up 10.3% year over year while operating margin stood at 6.1% versus 6.3% in the year-ago quarter.

Balance Sheet/ Cash Flow

Exiting the fiscal second-quarter 2014, Shiloh Industries had cash and cash equivalents of $579 million, down from $1,023 million at the preceding quarter-end. Long-term debt was $118.6 million versus $116.7 million in the previous quarter.

In the first-half of fiscal 2014 (ended Apr 30, 2014), Shiloh Industries generated cash of $10.9 million versus $12.4 million generated in the comparable year-ago period. Capital expenditure was $11.5 million, down 7.2% year over year.

Acquisition

Along with the earnings release, Shiloh Industries announced the signing of an agreement to acquire Finnveden Metal Structures FMS from FinnvedenBulten AB for approximately $56.6 million. The transaction adds stamping business and magnesium die casting technology of FinnvedenBulten, along with a $180 million revenue generation capacity and 800 employees to the company's portfolio. The acquisition is expected to close by June end.
 
Shiloh Industries has a $268.5 million market capitalization and carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the steel industry worth a look include Universal Stainless & Alloy Products Inc. USAP, ThyssenKrupp AG (TYEKF) and Tower International, Inc. TOWR. While Universal Stainless & Alloy Products sports a Zacks Rank #1 (Strong Buy), both ThyssenKrupp AG and Tower International have a Zacks Rank #2 (Buy).

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