Strength in Aerospace Segment Aids Barnes (B) Amid Cost Woes
Barnes Group Inc. B is well-poised to gain from its well-diversified portfolio and favorable pricing policies. Volume increases within both the aerospace aftermarket and the aerospace original equipment manufacturer (OEM) businesses within the Aerospace segment are aiding the company.
The aerospace OEM business is benefiting from on-going production rate increases by both Boeing and Airbus. Improved passenger traffic and the resurgence of wide-body activity are driving the Aerospace segment’s aerospace aftermarket business. Higher volumes within the molding solutions and automation businesses, and favorable pricing actions are driving the growth of the Industrial segment.
Barnes aims to expand its market share, product offerings and customer base through strategic acquisitions. In August, the company completed the acquisition of MB Aerospace, expanding its aerospace business’ global OEM offering and aftermarket repair capabilities. The buyout enhances Barnes’ ability to deliver value-add solutions across the aero-engine value chain, broadens customer relationships and widens exposure to the defense industry. MB Aerospace is a part of Barnes’ Aerospace segment.
Among other companies from the Industrial Products sector, Allegion plc ALLE and Applied Industrial Technologies, Inc. AIT focus on strengthening and expanding its businesses through the acquisition of assets.
Allegion acquired Plano Group through one of its subsidiaries in January 2023. The acquisition expanded ALLE’s Interflex portfolio and AWFM business with new capabilities in SaaS models and recurring revenue solutions.
In July 2022, the company acquired Access Technologies for $900 million. With this acquisition, Allegion has been able to enhance its access, egress and access control solutions offerings. In the second quarter of 2023, acquisitions boosted sales by 12.5%.
Applied Industrial has also added multiple assets to its portfolio over time. The Advanced Motion Systems Inc. (April 2023) buyout expanded the company’s footprint in the upper Northeast region of the United States while helping to bolster relationships with leading suppliers.
The acquisition of Automation, Inc. (November 2022) expands Applied Industrial’s footprint across key verticals and geographies while supplementing its value-added services and cross-selling efforts. In fourth-quarter fiscal 2023 (ended Jun 30, 2023), buyouts had a positive impact of 0.7%, year over year, on the company's sales.
Coming back to Barnes, the company’s measures to reward its shareholders through share repurchases and dividend payouts are encouraging. In the first six months of 2023, Barnes rewarded its shareholders with dividends of $16.2 million. In 2022, the company paid out dividends worth $32.4 million to its shareholders. While exiting the second quarter of 2023, the company was left to repurchase 3.4 million shares under its previously approved share buyback program.
However, escalating costs and expenses have been a major concern for B over time. The company’s cost of sales in the first six months of 2023 increased 7.4% year over year. High raw material costs are pushing up the cost of sales. Selling and administrative expenses also rose 22.2% in the same period due to increasing employee termination costs, rent expenses and consulting fees.
Barnes has operations in the Americas region, Europe, Asia and the rest of the world, generating 53.6%, 29.9%, 15.2% and 1.3% of the first six months of 2023 revenues, respectively. Such international operations expose the company to unfavorable movements in foreign currencies and others. Foreign exchange headwinds decreased net sales within the Industrial segment by approximately $4.4 million in the first six months of 2023.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report
Barnes Group, Inc. (B) : Free Stock Analysis Report
Allegion PLC (ALLE) : Free Stock Analysis Report
