Savvy Trades and Investments

[abh3vt]

Thanks Hweb! On the call, the company addressed the sequential and y/y decline in backlog. The reasons for the decline is twofold:
a) Weakening demand from heavy equipment companies, but this is expected to pick up by end of 2024
b) High lead times in premium alloys business. This has started to come down (i.e. lead times are now 45-50 weeks, down from 70-80 weeks a year ago.) USAP has been working with their premium alloy buyers to schedule in buys whenever slots open up. CRS mentioned this same dynamic at play, so I think any decline in backlog from this area is a bit phantom in nature. Demand is not decreasing at all.

USAP management has said they still aren't firing on all cylinders because of the lack of production/capacity for their premium alloys. Once (if?) demand in heavy equipment resumes, then this will further add to sales and earnings. SGA will be constant at 8.5MM/quarter in 2H. Int expense will be coming down due to refi and because of continuing debt reductions. One of the more bullish calls I've heard, outside of CRS, another competitor.

I think this company can be earning 3.60+ in FY24. Slap a 20x multiple on that, and you can see the potential for further price appreciation.