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Barnes Group (B) Suffers From Weak End Markets Amid Pandemic

Zacks Equity Research
·3 min read

Barnes Group, Inc. B has failed to impress investors with its recent operational performance, owing to difficult end-market conditions amid the coronavirus outbreak and other woes, which are expected to adversely impact its earnings.

The Zacks Rank #4 (Sell) company has a market capitalization of $1.9 billion. Year to date, it has lost 37.7% compared with the industry’s decline of 15.8%.

 


 

Let’s delve into the factors that might continue to take a toll on the firm.

Coronavirus Outbreak-Led Issues: Continued weakness in the Industrial segment remains concerning for Barnes Group. For instance, in the first quarter of 2020, the segment’s organic sales recorded a year-over-year decline of 12%. The decline was primarily on account of soft automotive, tool & die, and packaging end markets amid the pandemic. The difficult end-market in the wake of the pandemic will likely continue to affect the segment’s performance in 2020. In addition, the 737 MAX-related issues and lower aircraft demand will likely adversely impact the performance of its Aerospace segment’s OEM business. The company anticipates its organic sales to decline 30% year over year in the second quarter.

Forex Woes: Given its widespread presence in international markets, it is exposed to the unfavorable foreign currency movements. For instance, in both fourth-quarter 2019 and first-quarter 2020, foreign exchange headwinds hurt its revenues by 1%.

Escalating Costs: Barnes Group has been experiencing rising cost of sales over some time. For instance, in the last five years (2015-2019), the company’s cost of sales grew 3.8% (CAGR). Also, the company’s selling, general and administrative expenses recorded an increase of 5% (CAGR) over the same time frame. At the end of the first quarter, its cost of sales, and selling, general and administrative expenses remained high at $208.2 million and $73.1 million, respectively.

Estimate Trend: In the past 60 days, analysts have increasingly become bearish on the company, as evident from negative earnings estimate revisions. Notably, the Zacks Consensus Estimate for its 2020 earnings has trended down from $1.79 to $1.75 on four downward estimate revisions against none upward. In addition, over the same timeframe, the consensus estimate for 2021 earnings has trended down from $2.38 to $2.25 on four downward estimate revisions against none upward.

Stocks to Consider

Some better-ranked stocks are Altra Industrial Motion Corp. AIMC, Broadwind Energy, Inc. BWEN and Ingersoll Rand Inc. IR. While Altra Industrial currently sports a Zacks Rank #1 (Strong Buy), Broadwind Energy and Ingersoll Rand carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Altra Industrial delivered a positive earnings surprise of 9.78%, on average, in the trailing four quarters.

Broadwind Energy delivered a positive earnings surprise of 50.00%, on average, in the trailing four quarters.

Ingersoll Rand delivered a positive earnings surprise of 3.47%, on average, in the trailing four quarters.

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Ingersoll Rand Inc. (IR) : Free Stock Analysis Report
 
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Zacks Investment Research