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Barnes (B) to Gain From Strong Gimatic Business, Headwinds Persist

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Zacks Equity Research
·3 min read
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On Jan 7, we issued an updated research report on Barnes Group, Inc. B.

In the past six months, this Zacks Rank #3 (Hold) stock has returned 40.7% compared with the industry’s growth of 30.1%.

Present Scenario

Barnes Group has been experiencing consistent strength in its Gimatic business. Notably, Gimatic’s patented technologies and intellectual property-based solutions have enhanced the company’s portfolio of robotic technology solutions in the industrial automation market. The business is poised to benefit from the rising adoption of robotic technologies in end markets. Also, the company’s focus on investing in product innovation, coupled with its commercial and operational excellence initiatives, will likely act as tailwind in the quarters ahead.

Moreover, the company focuses on rewarding shareholders through dividend payouts and share buybacks. For instance, in the first nine months of 2020, the company returned $39.9 million of cash to shareholders through dividend payouts and share buybacks. Exiting the third quarter of 2020, it possessed the authorization to repurchase 3.7 million worth of common stock under its existing stock repurchase authorization program. However, for the time being, due to the uncertain economic environment caused by the coronavirus pandemic, it has suspended share repurchase activity.

However, the company has been experiencing softness in automotive and industrial end markets. In the third quarter, its Industrial segment’s sales declined 15% on a year-over-year basis, owing to low order intakes, caused mostly by the coronavirus outbreak-led issues. Also, reduced aircraft utilization and lower demand for its manufactured components in the aerospace end market are likely to affect its Aerospace segment’s performance in the quarters ahead.

Further, the company has been dealing with rising cost of sales. Notably, in the third quarter, its total operating costs and expenses (including cost of sales and selling, general and administrative expenses) were $237.8 million, reflecting an increase of 5.5% on a sequential basis. If unchecked, higher costs and operating expenses might continue to affect its margins and profitability in the quarters ahead.

Stocks to Consider

Some better-ranked companies from the same space are Kaman Corporation KAMN, Graco Inc. GGG and Dover Corporation DOV. While Kaman currently sports a Zacks Rank #1 (Strong Buy), Graco and Dover carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kaman delivered a positive earnings surprise of 43.61%, on average, in the trailing four quarters.

Graco delivered a positive earnings surprise of 21.74%, on average, in the trailing four quarters.

Dover delivered a positive earnings surprise of 18.10%, on average, in the trailing four quarters.

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Graco Inc. (GGG) : Free Stock Analysis Report
 
Dover Corporation (DOV) : Free Stock Analysis Report
 
Kaman Corporation (KAMN) : Free Stock Analysis Report
 
Barnes Group, Inc. (B) : Free Stock Analysis Report
 
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