USAP - Universal Stainless Getting Its Due As Aerospace Demand Drives Strong Operating Leverage
2024-06-18 07:18:59 ET
Summary
- Strong aerospace demand and a positive mix shift have driven strong capacity utilization growth, revenue growth, operating leverage, and margin improvement at Universal Stainless & Alloy Products.
- The aerospace market remains strong with significant production growth expected from major OEMs like Airbus and Boeing over the next three years.
- Other end-markets aren't so healthy, including heavy machinery, short-cycle industrials, and oil/gas, and see risks to USAP's pricing if this weakness worsens.
- I expect at least a few strong earnings and FCF years from USAP, and can argue for a mid-$30s fair value without further beat-and-raise quarters, but this is still a cyclical business with a spotty long-term history of value creation.
It took a while, but Universal Stainless & Alloy Products ( USAP ) is now basking in the same aero cycle glow as other specialty alloy companies like ATI ( ATI ) and Carpenter (CRS), as strong aerospace demand is driving attractive operating leverage, stronger margins, and positive cash flows. While it took a little longer for USAP to get moving relative to those larger, better-covered names, the shares have almost quadrupled in value since my last update on the company....
Universal Stainless Getting Its Due As Aerospace Demand Drives Strong Operating Leverage