Sell Alert
Tredegar Corp. (TG)
from Top Stock Insights, recommended at $26 in the July 1, 2013 Daily Alert and Investment Digest issue 746.
I’m underwhelmed by Tredegar’s (NYSE:TG) Q3 earnings report.
Total sales were up by 12.2%, but income from continuing operation was slashed by 48% to $7.4 million. And looking at the first nine months of 2013, net income was down by 9.5%.
Tredegar operates in two areas; film products and aluminum extrusions. When I recommended the stock I believed both of these segments would grow. They have on the top line, but company-wide profitability is eroding.
Film sales make up 67% of total sales, and were up 2.5% in the last quarter. But operating profit was off by 7%. Aluminum grew quickly, by 40%, and operating profit was up an impressive 87%. But given the size of the segment it wasn’t enough to compensate for the fall-off in the film division.
[In addition] the tone of things isn’t overwhelmingly positive at Tredegar. I think the company has opportunities out there, but I’m not convinced they’ll translate into a strong share price in the last quarter of the year. Or even in the first half of 2014 for that matter. ... We’ve seen a pattern with this stock rising into earnings and then falling after a disappointing result. I expect the same will happen this time. We can grab a 3.6% gain by selling the stock today and move to the sidelines. Let’s do it.
Action to take: Sell Tredegar (NYSE:TG) at around $26.50 to lock in a 3.6% gain.
Tyler Laundon and Ian Wyatt, Top Stock Insights, www.topstockinsights.com, 866-447-8625, November 5, 2013