Titanium Metals: 3Q Earnings Miss Offers Good Entry Point

| About: Precision Castparts (PCP)

Titanium Metals Corp. (TIE) [TIMET] is a company that manufactures and distributes titanium. We believe the company will continue to benefit from the upturn in the commercial aerospace cycle, as titanium is a key material on airplanes. There is high need for new aircrafts, while the production from Boeing (NYSE:BA) and Airbus remains constrained. The current strength in aerospace demand continues to be driven by international airlines in developing economies. Nevertheless, the legacy U.S. airlines are expected to return to the market over the next several years. It is widely expected that the commercial aerospace cycle will last until 2010 or 2011.

Titanium Metals has already had a nice run over the past two years but we believe there is much more upside going into 2008 with all of the new titanium capacity coming on-line for the company. TIMET will enjoy an increase in profits with these additions in capacity, which will drive the stock to new highs. There have also been rumors of late that TIMET may be a potential take-out candidate, as larger metals companies look to expand and diversify and cash-rich private equity funds look for investments. The current level offers a good entry point for long term investors as the shares recently sold off due to a 3Q earnings miss related to heavy metals inventory in the aerospace supply chain. We view the earnings miss as an anamoly as the supply chain should self-correct over time.

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