Materion Corporation (NYSE:MTRN) today provided an update on expected third quarter 2013 results and also commented on its outlook and initiatives to reduce costs and improve margins.
Third quarter markets weaker and high-margin shipments delayed
Fourth quarter expected to be the strongest of the year
Cost reduction actions taken in the fourth quarter driving significant operating performance improvement beginning in 2014
THIRD QUARTER 2013 WEAKER THAN EXPECTED The previously announced weaker business conditions being experienced at the beginning of the third quarter of 2013 did not improve during the third quarter to the level that the Company originally anticipated. Order entry has been highly variable, and business levels have been increasing at a slower than expected rate. In addition, shipments of certain high-margin beryllium-based defense and nuclear science as well as defense optics orders have been delayed. Profits were also adversely affected by lower manufacturing yields and efficiencies in the quarter. The impact of these factors has been offset, in part, by continued strong business levels in the medical, commercial aerospace, automotive electronics and commercial optics markets. As a result of these factors, earnings for the third quarter are expected to be approximately $0.20 per share. FOURTH QUARTER TO BE THE STRONGEST OF THE YEAR The aforementioned delayed orders are expected to ship in the fourth quarter. In addition, production levels at the Company’s new beryllium pebble plant continued to increase throughout the third quarter and were at record levels in the month of September, well ahead of the fourth quarter target. As a result of these and other factors, the Company expects results for the fourth quarter to be well ahead of the third quarter and the strongest of the year, exceeding the $0.43 per share reported in the second quarter, absent the impact of the actions discussed below.
Looking at the universe of stocks we cover at Dividend Channel, on 2/17/15, Materion Corp will trade ex-dividend, for its quarterly dividend of $0.085, payable on 3/3/15. As a percentage of MTRN's recent stock price of $37.16, this dividend works out to approximately 0.23%.
Shareholders of Materion Corp looking to boost their income beyond the stock's 0.9% annualized dividend yield can sell the June 2015 covered call at the $40 strike and collect the premium based on the $1.40 bid, which annualizes to an additional 8.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.3% annualized rate in the scenario where the stock is not called away. Any upside above $40 would be lost if the stock rises there and is called away, but MTRN shares would have to climb 11.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 15.1% return from this trading level, in addition to any dividends collected before the stock was called.
In trading on Friday, shares of Materion Corp crossed below their 200 day moving average of $34.17, changing hands as low as $34.10 per share. Materion Corp shares are currently trading off about 1.6% on the day.