Update: Tredegar Earnings

Aug.21.14 | About: Tredegar Corporation (TG)

Summary

The company posted a Q2 year-over-year decline in revenues, and the operating profit was mixed.

We still have a bullish thesis on the company, given its exposure to key markets.

We didn't expect Q2 to be quite as weak, and note that 2014 is a rebuilding year.

Tredegar (NYSE:TG) posted Q2 earnings of $0.11, or $0.34 per share (excluding special items). The company lacks analyst coverage, and had no consensus estimate for the quarter. Revenues were down 7.7% y/y. Its operating profit was down 21% y/y for its film products segment, but its aluminum segment saw operating profit up 84% y/y. The company called 2014 a rebuilding year, noting that the second half of 2014 will fall short of its previous performance targets.

Since we first covered Tredegar back in December, shares are down 16%. At the time, we put a $31 price target on the stock - now suggesting upwards of 44% upside from current levels. As we noted in December,

The top line growth will come by the way of various market tailwinds, including the rapidly rising age of individuals in developed markets, and the rise of the middle class in developing markets. As well, Tredegar has exposure to the construction markets, which should continue its post real estate bubble burst rebound.

The shares now trade at just 7.3x EV/EBITDA, versus 8.6 in December. But the company still has exposure to two very interesting markets, including adult diapers and smartphone/tablet manufacturing.

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