Universal Stainless (USAP) Q4 Earnings & Sales Miss Estimates

Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP) reported earnings of $0.2 million or 2 cents per share in the fourth quarter of 2019, down 65.5% from $0.6 million or 7 cents per share in the prior-year quarter. Its earnings per share missed the Zacks Consensus Estimate of 3 cents.

Net sales of $55.2 million fell 3.3% year over year in the quarter and missed the Zacks Consensus Estimate of $57.3 million.

Q4 Highlights

In the reported quarter, revenues in Aerospace and Power generation end-markets increased 7.2% and 51.6% year over year to $37.6 million and $2.9 million, respectively.Revenues in Oil & Gas, Heavy Equipment, and General industrial, conversion services & other markets declined 0.4%, 91.8% and 22.1% to $6.3 million, $4.8 million and $3.6 million, respectively.

Overall gross margin for the fourth quarter declined 8.9% year over year to $5.9 million due to unfavorable product mix.

Universal Stainless & Alloy Products, Inc. Price, Consensus and EPS Surprise

Financials

Universal Stainless had cash and cash equivalents of $0.17 million at the end of 2019, down 95.4% year over year. The company’s long-term debt increased around 41% year over year to $60.4 million.

Net cash used in operating activities was $4.4 million for 2019. Capital expenditure for the fourth quarter increased 81.8% year over year to $4 million.

The company’s fourth-quarter income tax benefit increased around 50% year over year to $0.6 million. This was mainly on account of changes in state income tax items and increased R&D tax credits.

Guidance

Moving ahead, Universal Stainless expects hydraulic forge production activity to continue improving in 2020. Moreover, for 2020, the company anticipates savings in operating costs from its mid-size bar cell in the Dunkirk facility. For the year, it also expects improvements in its melting operations.

On the commercial side, Universal Stainless anticipates sales volume of tool steel to increase year over year due to developments in tool steel order entry. Further, it expects its premium alloy backlog to continue.

For 2020, the company also anticipates improved alignment of material costs year over year.

Moreover, Universal Stainless continues to evaluate the production outlook for Boeing (NYSE:BA) 737 Max and its potential impact on order entry activity.

Price Performance

Shares of the company have dipped 6% in the past year compared with the industry’s 12.2% decline.

Zacks Rank & Stocks to Consider

Universal Stainless currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the basic materials space are Daqo New Energy Corp. (NYSE:DQ) , Royal Gold, Inc. (NASDAQ:RGLD) and Commercial Metals Company (NYSE:CMC) .

Daqo New Energy has a projected earnings growth rate of 326.3% for 2020. The company’s shares have rallied 60.1% in a year. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Royal Gold has an estimated earnings growth rate of 83.5% for fiscal 2020. It currently flaunts a Zacks Rank #1. Its shares have returned 39.4% in a year.

Commercial Metals has a Zacks Rank #2 (Buy) and a projected earnings growth rate of 17.3% for 2020. The company’s shares have rallied 33.1% in a year.

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