Timkensteel Corp (TMST) Looks Solid After the Spinoff


Timkensteel Corp (NYSE:TMST) has been spinned off from Timken Co (NYSE:TKR) . Unlike many other spinoffs, this one is different, because both companies look good enough and competitive.

Timkensteel Corp (NYSE:TMST), Timken Co (NYSE:TKR), NYSE:TKR*, Tim Timken, Timken Spinoff

Jim Cramer has interviewed Tim Timken, chairman, president and CEO of TimkenSteel, on CNBC recently and they discussed how the spinoff helped the stocks of both companies, Timkensteel Corp (NYSE:TMST) and Timken Co (NYSE:TKR). After the spinoff every shareholder got one share of Timkensteel Corp (NYSE:TMST) for every two shares of Timken Co (NYSE:TKR).

Cramer was really impressed by the balance sheets of both the companies after spinoff. Timken said that the company has thought of separating the companies four times so far and according to him, they felt that it is the correct time to split the companies. Timkensteel Corp (NYSE:TMST) doesn’t just have internal customers, its steel is also in demand in oil and gas, automobile industry and almost all industrial segments.

Timkensteel Corp (NYSE:TMST)’s mobile business in automobiles accounts for half of its sales approximately. According to Timken, it was decided to split the parent company into two well competitive companies and all the divisions were split in proportions. He said that Timkensteel Corp (NYSE:TMST) is not focused on big commodities and they are more focused on niches.

Timkensteel Corp (NYSE:TMST) has a continuous caster ready and will be launched in August which would be solidifying their position in the oil & gas industry and other heavy metal industry. There are concerns that Timken Co (NYSE:TKR) has a lot of customers overseas while Timkensteel Corp (NYSE:TMST) doesn’t have a lot of scope in that market and the CEO said that the company is looking to increase the overseas market share aggressively.

“About 13% of what we do ends up outside United States. We got warehousing operations in Mexico and China, we’re building up a sales and distribution network globally and we believe we can continue to leverage that in the niches of the market.”

Tim said that the company doesn’t focus on all the segments in the steel industry and has long term clients in fixed sectors that Timkensteel Corp (NYSE:TMST) specializes in. According to him anyone can depend on Timkensteel Corp (NYSE:TMST) to build out a whole new oil rig. However the bigges challenge is that after the spinoff Timkensteel Corp (NYSE:TMST) would be a part of the midcap and not s&p and the CEO was not worries about it though he said he was a little nervous however he thinks that it gives the company a great opportunity and he said that the stock is ideal for someone who is looking for a premium steel  stock.

Disclosure: None