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Barnes Group Declines 32.8% YTD: What's Hurting the Stock?

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Zacks Equity Research
·3 min read
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Shares of Barnes Group, Inc. B have lost 32.8% compared with the industry’s decline of 16.9% year to date. The decrease in share price primarily reflects the adverse impacts of the coronavirus pandemic on the company’s operational performance.

 


Barnes Group currently carries a Zacks Rank #5 (Strong Sell).

Factors Affecting the Company

Barnes Group has been experiencing persistent softness in the Industrial segment. For instance, the segment’s organic sales in first-quarter 2020 decreased 12% year over year. The decline was primarily attributable to softness in its automotive, tool & die, and packaging end markets on account of the coronavirus outbreak-led issues. The company believes that difficult end-market conditions in the wake of the pandemic will continue to affect the segment’s performance in 2020. Also, the 737 MAX-related issues and lower aircraft demand will likely hurt the performance of the Aerospace segment’s OEM business. The company anticipates is organic sales to decline about 30% in the second quarter on a year-over-year basis.

Also, rising cost of sales has remained a major concern for Barnes Group over the past few quarters. It is worth mentioning that in the last five years (2015-2019), its cost of sales increased 3.8% (CAGR). In addition, the company’s selling, general and administrative expenses recorded an increase of 5% (CAGR) over the same time frame. Notably, 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.

Moreover, given its extensive geographic presence, the company is exposed to geopolitical risks and headwinds arising from unfavorable movements in foreign currencies. For instance, in both fourth-quarter 2019 and first-quarter 2020, unfavorable foreign exchange movements hurt its top-line performance by 1%.

In addition, the Zacks Consensus Estimate for the company’s earnings is pegged at $1.84 for 2020 and $2.25 for 2021, marking declines of 36.3% and 33.2% from the respective 60-day-ago figures. Notably, there have been four downward revisions in estimates for both 2020 and 2021 in the past 60 days.

Stocks to Consider

Some better-ranked stocks are Activision Blizzard, Inc. ATVI, Broadwind Energy, Inc. BWEN and Graphic Packaging Holding Company GPK. While Activision Blizzard currently sports a Zacks Rank #1 (Strong Buy), Broadwind Energy and Graphic Packaging carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Activision Blizzard delivered a positive earnings surprise of 31.34%, on average, in the trailing four quarters.

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

Graphic Packaging delivered a positive earnings surprise of 9.59%, on average, in the trailing four quarters.

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