Barnes Group to Redeem 3.375% Senior Notes


Barnes Group Inc. (B), in an attempt to reduce its debts, recently announced plans to redeem its 3.375% Convertible Senior Subordinated Notes due 2027. The notes worth $55.4 million will be redeemed effective Jul 31, 2014.

The company intends to pay cash for the redeemed debentures, financed primarily through its senior credit facility. This not only indicates the company’s strong cash position but also its efforts to improve the debt-to-equity ratio.

Exiting first-quarter 2014, Barnes Group had cash and cash equivalents of approximately $61.4 million while long-term debts, excluding current portion of $56.6 million, stood at $503.1 million. Currently, the company’s debt-to-equity ratio is 43.8% versus 107.4% for the industry.

A brief discussion on Barnes Group’s first-quarter results is provided below.

Earnings came in at 50 cents per share, up 25% year over year but below the Zacks Consensus Estimate of 52 cents. Revenues grew 18%, including organic sales growth of 4%. Business at the Industrial segment flourished with revenues rising 23% year over year. Aerospace segment revenues were up 10.4%. Operating margin expanded 180 basis points.   

The Zacks Consensus Estimate for Barnes Group is pegged at $2.26 for 2014 and $2.54 for 2015, reflecting year-over-year growth of 23.7% and 12.4% respectively. Earnings are anticipated to grow by 10.0% in the next five years.  

Barnes Group is a well-known industrial equipment and components maker, currently carrying a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Gorman-Rupp Co. (GRC), Nordson Corporation (NDSN) and Blount International Inc. (BLT). All these companies hold a Zacks Rank #2 (Buy).

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