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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 challenges, which are expected to adversely impact its earnings.
The Zacks Rank #5 (Strong Sell) company has a market capitalization of nearly $2 billion. In the past six months, it has lost 41.8% compared with the industry’s decline of 7.8%.
Let’s delve into the factors that might continue to take a toll on the firm.
Weak End-Markets: In the quarters ahead, continued softness in automotive and industrial end markets on account of low order intakes will likely continue to adversely impact Barnes Group’s Industrial segment. Also, reduced aircraft utilization and lower aircraft demand remain concerning for the Aerospace segment’s aftermarket and OEM businesses. Notably, the company’s organic sales are predicted to decline 30% in third-quarter 2020 on a year-over-year basis. Owing to the uncertainties regarding the impacts of the pandemic on its operating results, it refrained from providing financial guidance for 2020.
High Costs & Expenses: The company has been dealing with rising costs and expenses over time. For instance, in the last five years (2015-2019), its cost of sales recorded an increase of 3.8% (CAGR). Also, the company’s selling, general and administrative expenses grew 5% (CAGR) during the same time frame. Notably, exiting second-quarter 2020, its cost of sales, and selling, general and administrative expenses were recorded at $147.1 million and $78.4 million, respectively.
Forex Woes: Given its widespread presence in international markets, Barnes Group is exposed to the unfavorable foreign currency movements. For instance, in the first and second quarters of 2020, foreign exchange headwinds hurt its top-line performance by 1%.
Estimate Trend: In the past 30 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 $1.82 to $1.73 on two downward estimate revisions against one upward. In addition, over the same timeframe, the consensus estimate for 2021 earnings has trended down from $2.25 to $2.01 on three downward estimate revisions against none upward.
Stocks to Consider
Some better-ranked stocks from the same space are Chart Industries, Inc. GTLS, Altra Industrial Motion Corp. AIMC and Graco Inc. GGG. While Chart Industries sports a Zacks Rank #1 (Strong Buy), Altra Industrial and Graco carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chart Industries delivered an earnings surprise of 10.17%, on average, in the trailing four quarters.
Altra Industrial delivered an earnings surprise of 31.43%, on average, in the trailing four quarters.
Graco delivered an earnings surprise of 8.68%, on average, in the trailing four quarters.
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Graco Inc. (GGG) : Free Stock Analysis Report
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