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John Bean (JBT) Bets on Order Trends, Buyouts Amid Cost Woes

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·5 min read
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John Bean Technologies Corporation JBT is well-poised to benefit from the uptrend in its order levels in both its segments — JBT FoodTech and JBT AeroTech. The company’s strategic acquisition program to add complementary products to its portfolio and efforts to develop innovative products have been driving growth. While surging costs, supply chain and logistics disruptions are expected to weigh on its margins this year, expected savings from its Elevate plan, focus on process optimization efforts, and cost-cutting actions will aid margins.

Strong Order Levels to Fuel Revenues

In first-quarter 2022, the company witnessed growth of 16% in orders and ended with a backlog of around $1.1 billion. The FoodTech segment witnessed an improvement of 7% in orders, aided by demand for red meat, poultry, bakery, pet food, plant-based, ready meals, and pharmaceutical/nutraceutical applications. The AeroTech segment’s orders surged 53%, driven by demand for mobile equipment.

The FoodTech segment will gain from high demand for packaged food purchases, and the recovery in food service, and revenue growth is expected at 15-18% in 2022. The AeroTech segment’s revenues are expected to increase 18-22%. It will benefit from increased infrastructure spending and pickup in passenger air travel.

Cost Saving Actions to Ease Margin Pressure

The company has been witnessing material inflation, supply chain and logistics disruptions, and higher labor costs this year. Particularly in the AeroTech segment, a shortage of critical raw material, components and labor impeded its ability to build and ship equipment and increased the overall cost of running the business.

In third-quarter 2020, the company implemented a restructuring plan that is expected to generate incremental cost savings of $2.2 million in 2022. John Bean’s Elevate plan is likely to drive continued growth and margin expansion. Per the plan, the company is focusing on accelerating the development of innovative products and services to provide customers with solutions that will enhance yield and productivity. These efforts will help the company counter input cost inflation that is currently plaguing the industry.

Concerted Efforts to Grow Business

John Bean intends to ramp up initiatives that were previously underway to bring automation solutions to the protein market. Liquid Foods’ end products such as juice, canned foods and ready meals continue to witness high retail demand. The protein market has a total estimated market size of $18 billion. The Liquid food market has a worth of $8 billion. The company has ample scope for growth in both markets.

The company is capitalizing on its extensive installed base to expand recurring revenues (which accounts for around 40% of its revenues) from aftermarket parts and services, equipment leases, consumables and airport services. In AeroTech, the company plans to continue developing advanced military product offerings and customer support capabilities to service global military customers.

Acquisitions Remain a Key Catalyst

John Bean has a strategic acquisition program focused on companies that add complementary products, which enable it to offer more comprehensive solutions to customers. In the last few years, the company acquired Proseal UK Limited, Prime Equipment Group and certain assets and liabilities of MARS Food Processing Solutions. In 2021 the company bought AutoCoding Systems to strengthen its abilities in the growing global market for in-line coding and inspection solutions. The addition of Prevenio last year expanded the recurring revenue stream and ability to address the food safety needs of customers. It closed the buyout of Urtasun in the fourth quarter of 2021, which expanded its product offering in fruit and vegetable processing.

Share Price Performance

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The stock has gained 10.3% in the past month, against the industry’s decline of 9%.

Zacks Rank & Stocks to Consider

John Bean currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the Industrial Products sector are Titan International TWI, Myers Industries MYE and ScanSource SCSC.  All of these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Titan International has an estimated earnings growth rate of 85% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 35%.

Titan International pulled off a trailing four-quarter earnings surprise of 56%, on average. The company’s shares have appreciated 29% in the past month.

Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.

MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have gained 8% in a month’s time.

ScanSource has an expected earnings growth rate of 46% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 15% in the past 60 days.

ScanSource has a trailing four-quarter earnings surprise of 39%, on average. SCSC Corporation’s shares have gained 9% in the past month.

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