Barnes (B) Shares Down Nearly 27% Since Q3 Earnings Release
Barnes Group Inc. B reported third-quarter 2023 adjusted earnings of 19 cents per share, which missed the Zacks Consensus Estimate of adjusted earnings of 51 cents per share. The bottom line decreased 157.9% year over year due to the increasing cost of sales. Following this lackluster performance, shares of the company have plunged approximately 27% since the earnings release on Oct 27.
Inside the Headlines
Total revenues of $361 million outperformed the Zacks Consensus Estimate of $357 million. The top line increased 15% year over year, with organic sales growth of 4%.
Barnes reports revenues under two heads, namely Industrial and Aerospace. A brief snapshot of the segmental sales is provided below:
Revenues from the Industrial segment amounted to $205 million, up slightly year over year. Organic sales were down 3% year over year and favorable foreign currency movements increased sales by 4%. Our estimate for segmental revenues was $219.2 million.
The Aerospace segment’s sales totaled $156 million in the second quarter, up 41% from the year-ago quarter. The upside was due to a 50% increase in Aerospace original equipment manufacturing sales and a 7% rise in aftermarket sales. Our estimate for segmental revenues was $127.7 million.
Barnes Group, Inc. Price, Consensus and EPS Surprise
Barnes Group, Inc. price-consensus-eps-surprise-chart | Barnes Group, Inc. Quote
Margin Profile
In the reported quarter, Barnes’ cost of sales increased 21.5% year over year to $253.5 million. Selling and administrative expenses climbed 28.2% to $97.5 million.
Adjusted operating income was $39 million, flat year over year, while the margin decreased 160 basis points.
Balance Sheet & Cash Flow
At the end of the third quarter, Barnes had cash and cash equivalents of $90 million compared with $76.9 million recorded at the end of 2022. Long-term debt was $1,307.9 million, up from $569.6 million at the end of 2022.
Liquidity available in the quarter included cash of $90 million and credit under revolving facilities of $337 million.
In the first nine months of 2023, Barnes generated net cash of $71 million from operating activities compared with $43.5 million generated in the year-ago period. Capital expenditure totaled $37.5 million, up 72.7% from the year-ago quarter. Free cash flow was $33.6 million, compared with $21.8 million a year ago.
In the first nine months of 2023, Barnes rewarded its shareholders with dividends of $24.3 million, nearly flat year over year.
2023 EPS Outlook Lowered
Barnes expects organic sales growth of 5-6% for 2023 compared with 7-9% predicted earlier. Adjusted operating margin is estimated to be 11-12%.
The company has lowered its 2023 adjusted earnings outlook due to impacts from the MB Aerospace acquisition and a lower Industrial forecast. B now expects adjusted earnings to be $1.57-$1.67 per share compared with $2.15-$2.30 per share anticipated earlier. The Zacks Consensus Estimate of adjusted earnings is $2.13 per share.
Barnes expects capital expenditures to be approximately $50 million for 2023. The adjusted effective tax rate is forecasted to be 31-32% for 2023 compared with 24-25% predicted earlier.
Zacks Rank & Stocks to Consider
Barnes currently carries a Zacks Rank #4 (Sell). Some better-ranked companies from the Industrial Products sector are discussed below:
Applied Industrial Technologies, Inc. AIT presently carries a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 13.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AIT’s earnings estimates have increased 2.8% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 16.7% in the past year.
Axon Enterprise, Inc. AXON currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 60.2%, on average.
In the past 60 days, estimates for Axon’s earnings have remained steady for 2023. The stock has soared 36.6% in the past year.
Caterpillar Inc. CAT presently carries a Zacks Rank of 2. CAT’s earnings surprise in the last four quarters was 18.5%, on average.
In the past 60 days, estimates for Caterpillar’s 2023 earnings have increased 1.5%. The stock has gained 10.9% in the past year.
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