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Barnes (B) Earnings and Revenues Surpass Estimates in Q1

Zacks Equity Research
·4 min read

Barnes Group Inc. B reported better-than-expected results for first-quarter 2020, wherein both earnings and revenues surpassed estimates.

The company’s adjusted earnings in the reported quarter were 71 cents per share. This surpassed the Zacks Consensus Estimate of 52 cents. Notably, the bottom line remained flat year over year.

Top-Line Results

In the reported quarter, Barnes’ revenues decreased 12.2% year over year to $330.7 million. While organic sales in the quarter declined 8% year over year, divestitures and forex woes had an adverse impact of 3% and 1%, respectively.

The company’s revenues surpassed the Zacks Consensus Estimate of $330 million.

Barnes Group, Inc. Price, Consensus and EPS Surprise

 

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

Barnes Group, Inc. price-consensus-eps-surprise-chart | Barnes Group, Inc. Quote

Barnes reports net sales under two heads — Industrial and Aerospace. A brief snapshot of the segmental sales is provided below:

Net sales generated from Industrial amounted to $199.1 million, declining 18% year over year. The segment suffered from persistent weakness in certain end markets and the coronavirus outbreak-related issues. Organic sales were down 12% year over year, while forex woes had an adverse impact of 2%. Divestiture of the Seeger business had a negative impact of 4%.

Aerospace’s sales were $131.6 million in the first quarter, down 2% year over year. Original equipment manufacturing net sales declined 7% on account of the Boeing 737 Max-related issues. Meanwhile, aftermarket net sales grew 8%, driven by growth in spare parts as well as maintenance, repair and overhaul sales.

Margin Profile

In the reported quarter, Barnes’ cost of sales decreased 14.9% year over year to $208.2 million. Notably, cost of sales represented 63% of net sales versus 64.9% in the year-ago quarter. Selling and administrative expenses decreased 10.2% year over year to $73.1 million, and represented 22.1% of net sales.
 
Adjusted operating income in the quarter declined 5% year over year to $51.7 million, while margin expanded 110 basis points to 15.6%. Interest expenses totaled $4.3 million in the reported quarter.

Balance Sheet & Cash Flow

Exiting the first quarter, Barnes’ cash and cash equivalents were $112.8 million, up 20.3% from $93.8 million recorded in the last reported quarter. Long-term debt was $783.4 million, reflecting a 5% decline from $825 million in the last reported quarter.

In the first three months of 2020, it generated net cash of $47.2 million from operating activities, down 11% from the comparable period of the previous year. Capital expenditure totaled $11.9 million, decreasing 13.1% year over year. Free cash flow was $35.3 million versus $39.3 million reported a year ago.

During the quarter, Barnes paid out dividends amounting to $8.1 million, representing a 1% decrease over the year-ago quarter’s disbursement. Also, shares worth $15.6 million were repurchased in the quarter.

Outlook

For the second quarter of 2020, Barnes anticipates adjusted earnings of $0.20-$0.30 per share, suggesting a decline of 66.7% at the mid-point from the year-ago reported figure.

Total net sales for the second quarter are predicted to decline modestly from the previous year. While organic sales are predicted to decrease about 30% in the year. Operating margin is predicted to be 8.5-10% in the year.

However, on uncertainties, regarding the impacts of the coronavirus outbreak on financial and operating results, the company has withdrawn its guidance for 2020.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the Zacks Industrial Products sector are Tennant Company TNC, Broadwind Energy, Inc. BWEN and Acco Brands Corporation ACCO. All the companies presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Tennant delivered a positive earnings surprise of 26.60%, on average, in the trailing four quarters.

Broadwind delivered a positive earnings surprise of 10.42%, on average, in the trailing four quarters.

Acco Brands delivered a positive earnings surprise of 19.04%, on average, in the trailing four quarters.

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