It has been about a month since the last earnings report for John Bean (JBT). Shares have added about 3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is JBT due for a pullback? 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.
John Bean Technologies Q3 Earnings Beat Estimates
John Bean Technologies Corporation reported adjusted earnings of $1.28 per share in third-quarter 2019 surpassing the Zacks Consensus Estimate of $1.08 and improved 14% from prior-year quarter figure of $1.12. Further, the figure was higher than management’s guidance of $1.05-$1.10. The improved performance can primarily be attributed to savings stemming from the restructuring program and implementation of the JBT operating system and higher percentage of revenues from aftermarket business.
On a reported basis, the company’s earnings per share of $1.04 reflects an improvement of 27% from the year-ago figure of 82 cents.
The company’s revenues of $489 million in the reported quarter fell short of the Zacks Consensus Estimate of $505 million. However, the top line improved 1.6% year over year. Acquisition growth of 10% helped offset a drop of 3% in organic sales, an unfavorable impact of foreign exchange of 2% and a decline of 4% thanks to the absence of the ASC 606 transition benefit recorded in third-quarter 2018.
Orders in the JBT FoodTech segment remained flat year over year at $283 million in the reported quarter. Orders in the JBT AeroTech segment were at $180 million, reflecting a year-over-year growth of 9%. Backlog in the FoodTech segment was down 8% in the reported quarter while the AeroTech segment saw a rise of 8%. At FoodTech, commercial activity has not converted to orders as quickly as last year owing to economic and trade uncertainty. However, market conditions for AeroTech remain solid.
Cost and Margins
Cost of sales dropped 1.4% year over year to $342 million in the reported quarter. Gross profit improved 9% year over year to $148 million. Gross margin expanded 220 basis points to 30.2%.
Selling, general and administrative expenses improved 12% year over year to $98 million. Adjusted operating profit climbed 4% year over year to $50 million. Adjusted operating margin expanded 20 bps year over year to 10.2% in the reported quarter. In the reported quarter, adjusted EBITDA came in at $75.8 million, up 15.4% year over year. The improvement in margins were driven by continued operational improvements as a result of the company’s restructuring program, implementation of the JBT operating system and a higher share of revenue from aftermarket business.
JBT FoodTech: Net sales inched up 0.5% year over year to $334 million. Adjusted operating profit increased 15% from the prior-year quarter to $50 million.
JBT AeroTech: Net sales improved 4% year over year to $155 million. The segment reported adjusted operating profit of $22 million, up 25% year over year.
John Bean Technologies reported cash and cash equivalents of $49 million as of Sep 30, 2019, up from $43 million as of Dec 31, 2018. The company generated $35 million of cash from operating activities during the nine-month period ended Sep 30, 2019 compared with $27 million reported in the prior-year comparable period. At the end of the third quarter of 2019, long-term debt was approximately $769 million, up from $387 million as of Dec 31, 2018.
The company has narrowed earnings guidance for 2019 as it expects better-than-expected margin gains will be offset by softer FoodTech revenue. EPS is now expected between $4.80 and $4.90 for the year, down from the prior guidance of $4.70-$4.90. Compared with EPS of $4.28 in 2018, the mid-point of the guidance range reflects year-over-year growth of 13%.
The company anticipates organic growth of 2-3%, lower than prior guidance of 4-5%. While acquisitions are expected to contribute growth of around 7% to revenues, foreign exchange translation is anticipated to be a 2-3% headwind. Reported revenues are expected to be flat to up 1% year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -9.38% due to these changes.
Currently, JBT has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, JBT has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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