The titanium story has been wooing select investors for years now.
After all, they may ask, given the clear strategic significance of the metal, and the undaunted expectations for meaningful future demand from commercial airliner manufacturers like Boeing
These factors have emboldened a loyal flock of titanium investors to expect great things from leading suppliers like Titanium Metals
Indeed, for any fortunate Fools who happened to pick up shares in TIMET for less than $0.25 back in late 2002, that investment would have multiplied 80-fold by now. If slightly less dramatic, the long-term charts of competitors Allegheny Technologies
But the past is, well, history. Following a 150% liftoff of TIMET shares over the past year, it becomes increasingly important for remaining investors to chart the likelihood of sustained strength … and here, we run into a bit of difficulty.
TIMET managed to double second-quarter profit to $0.11 per share, despite logging only a 3% increase in net sales year over year. Gross margins expanded, thanks to higher capacity utilization and lower raw material costs, but spot prices for titanium products unfortunately remain below those of the year-ago period. Competitor RTI International Metals noted a 13% year-over-year slide in realized titanium prices, from $22.23 per pound to an uninspiring $19.33. RTI reported a similar pairing of surging profit with barely improved net sales.
Over in the steel industry, we have seen producers like Steel Dynamics
I don't mean to douse titanium investors' fiery hopes. I just want to ensure that the apparent investor enthusiasm in the sector remains entirely well-researched. Reading only TIMET's market commentary, a Fool might expect no hint of softness in the market for this hard metal. On the other hand, RTI warns: "the amount of titanium inventory in the commercial aerospace supply chain continues to negatively impact spot market demand". RTI also states that "near-term, caution is warranted." I heartily agree.
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Fool contributor Christopher Barker can bend titanium with his bare hands, provided it's rolled into a thin foil. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns no shares in the companies mentioned. Titanium Metals is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletters today, free for 30 days.