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Barnes Group (B) Down 19% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Barnes Group (B). Shares have lost about 19% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Barnes Group due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Barnes Group Q2 Earnings & Revenues Miss, Decline Y/Y

Barnes Group reported disappointing second-quarter 2019 results, wherein both earnings and revenues missed estimates.

Earnings/ Revenues

Quarterly adjusted earnings came in at 75 cents per share, down 17% year over year from 90 cents. Moreover, the bottom line lagged the Zacks Consensus Estimate of 78 cents.

Revenues were $372 million, down 1% year over year. Also, the figure declined 4% organically. Notably, the top line missed the consensus estimate of $387 million.

Segmental Breakup

Revenues from the Industrial segment were $233.4 million, down 6% year over year. The decline was caused by continued softness in its automotive end markets and unfavorable impact of foreign currency translation.

The Aerospace segment generated revenues of $138.3 million, up 10% year over year. The improvement was driven by solid aerospace OEM (Original Equipment Manufacturer) sales and growth in maintenance, repair and overhaul, and spare parts sales.

Costs/Margins

Cost of sales in the second quarter was $238.3 million, up 0.3% year over year. Selling, general and administrative expenses were $76.4 million, up from $73.8 million. Adjusted operating margin was 15.7%, down 130 basis points.

Balance Sheet/Cash Flow

Exiting the second quarter, Barnes Group had cash and cash equivalents of $94.9 million, down from $100.7 million recorded as of Dec 31, 2018. At the end of the reported quarter, long-term debt was $889.1 million compared with $936.4 million as of Dec 31, 2018.

In the first six months of 2019, cash from operating activities totaled $108.2 million compared with $88.6 million generated in the comparable year-ago period.

Outlook

Barnes Group has provided adjusted earnings view for 2019 in the range of $3.18-$3.28, lower than $3.23-$3.35 guided earlier.

Total revenues are likely to grow in the range of 3-4%, while organic revenue growth is predicted to be flat to up 1%. This is comparable with the company’s earlier revenue growth guided range of 4-6%, and 1-3% growth band of organic revenue growth.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.76% due to these changes.

VGM Scores

Currently, Barnes Group has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Barnes Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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