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Barnes (B) Beats Q1 Earnings Estimates, Revises '18 View

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Barnes Group Inc. B reported impressive results for first-quarter 2018, with earnings surpassing estimates by 7.46%. Including the first-quarter results, the average earnings surprise for the last four trailing quarters was 6.23%.

The machinery company’s adjusted earnings in the reported quarter were 72 cents per share, above the Zacks Consensus Estimate of 67 cents. Also, the bottom line grew 1.4% from the year-ago tally of 71 cents.

Segmental Businesses Drive Net Sales

In the reported quarter, Barnes’ net sales amounted to $366.7 million, reflecting year-over-year growth of 7.3%. The improvement was driven by 1% gain from organic sales growth, 1% benefit from acquired assets and 5% positive impact from foreign-currency movements.

Also, the top line surpassed the Zacks Consensus Estimate of $364 million by roughly 0.6%.

The company reports revenues under the segments given below:

Revenues from the Industrial segment were approximately $246 million, increasing 8.2% from the year-ago quarter. Results improved on the back of 1% gain from acquired assets and 8% positive impact from foreign currency translations, partially offset by 1% decline in organic growth.

Revenues from the Aerospace segment totaled $120.7 million, rising 5.4% year over year. The improvement came on the back of 1% growth in sales, derived from original equipment manufacturing (OEM), and 19% growth in sales resulting from maintenance, repair and overhaul (MRO) activities along with sales from the spare parts business.

Backlog (Aerospace OEM) at the reported quarter-end stood at $733 million, increasing 8% growth over the year-ago quarter.

Margin Profile Weakens

In the quarter under review, Barnes’ cost of sales grew 8% year over year to $237.1 million. It was 64.7% of net sales versus 64.2% in the first quarter of 2017. Selling and administrative expenses, which was roughly 19.9% of the net sales, increased 10.5% year over year to $72.9 million.

Adjusted operating income slipped 40 basis points (bps) year over year to $56.6 million, while margin slipped 120 bps to 15.4%. Interest expense increased 16.2% year over year to $3.9 million.

Balance Sheet and Cash Flow

Exiting first-quarter 2018, Barnes’ cash and cash equivalents were $104.7 million, down from $145.3 million at the previous quarter-end. Long-term debt balance decreased 4.3% sequentially to $503.2 million.

In the quarter under review, the company’s net cash generation from operating activities totaled $30.5 million, down 41.2% from the year-ago quarter. Capital spending totaled $11.2 million versus $11.7 million in the year-ago quarter. Free cash flow in the quarter under review was $19.3 million, down 51.9% from the year-ago quarter.

During the reported quarter, the company paid dividend totaling $7.5 million and repurchased shares worth $33.5 million.


For 2018, Barnes Group anticipates gaining from strengthening end markets and initiatives directed to enhance operational efficiency.

Earnings per share are anticipated to be $3.03-$3.15, up from the previous expectation of $2.98-$3.13. The revised projection reflects year-over-year growth of 5-9%. Total revenues are projected to grow 5-6% versus the earlier forecast of 4-6%. Organic sales are predicted to grow 3-4% versus an earlier projection of 3-5%. Favorable foreign currency translation is predicted to have 2% positive impact on sales versus an earlier anticipation of 1%.

On a segmental basis, sales are predicted to grow in mid-single digit for Molding Solutions, low-single digit for Nitrogen Gas Products and remain flat for Engineered Components. Combining these, sales for the Industrial segment is predicted to grow in low-single to mid-single digit in 2018.

Likewise, for the Aerospace segment, sales are anticipated to grow in high-single digit in 2018. These include high-single-digit growth for OEM and MRO businesses while growing in a mid-single to high-single digit for Spare Parts business.

Operating margin is anticipated to be 15.5-16.5% while the effective tax rate is projected to be 25-25.5% versus the prior forecast of 25-26%. Capital expenditures are predicted to be around $60-$65 million while cash conversion will be above 100% of net income.

Barnes Group, Inc. Price, Consensus and EPS Surprise

Barnes Group, Inc. Price, Consensus and EPS Surprise | Barnes Group, Inc. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of approximately $2.9 billion, Barnes Group currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industry are DXP Enterprises, Inc. DXPE, Tennant Company TNC and IDEX Corporation IEX. While both DXP Enterprises and Tennant sport a Zacks Rank #1 (Strong Buy), IDEX Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last 60 days, earnings estimates for each of these stocks improved for the current year. Also, average positive earnings surprise for last four quarters was 189.56% for DXP Enterprises, 1.39% for Tennant and 4.80% for IDEX Corporation.

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