Timken (TKR) Closes Spinea Buyout, Expand Automation Solutions
The Timken Company TKR completed the acquisition of a leading European engineering company, Spinea, s.r.o. (Spinea).
Based in Presov, Slovakia, Spinea is a manufacturer of highly-engineered cycloidal reduction gears and actuators. The company’s solutions mainly used in high-precision automation and robotics applications in the factory automation sector. Spinea is expected to generate sales of around $40 million for the current year.
Timken is consistently focused on diversifying its portfolio to expand its power transmission products and services. In sync with that, TKR acquired Rollon and Cone Drive in 2018, which offers next-gen robotics and automation application technologies. Spinea supports Cone Drive's precision gearing business while further enhancing its product offering.
The latest acquisition will accelerate Timken's position in the growing automation space, which was the company's second-largest market after renewable energy in 2021. Timken continues to pursue strategic acquisitions to broaden its portfolio and capabilities across diverse markets, with a focus on bearings, adjacent power transmission products, and related services.
Timken’s diverse product portfolio serves various automation end-markets, including lubrication, robotics, logistics, packaging, medical and others. With the acquisition of BEKA Lubrication in 2019, TKR is the world’s second-largest automatic lubrication system producer. The company expects above-GDP growth broadly across the automation sector, driven by its outgrowth initiatives, while well poised to serve current and future global automation trends.
Cone Drive acquisition aided Timken in expanding growth in the attractive solar industry. As the world transitions to renewable energy sources, TKR expects its solar energy revenues to grow double-digit over the next three to five years. In the past three years, the company has been focused on building its renewable energy portfolio through innovation and acquisitions.
Renewable energy is currently Timken’s largest individual end-market sector generating 12% of sales, compared to only 5% in 2018. The global demand for renewable energy is expected to witness a CAGR of around 8% over the next 10 years. The share of electricity generation from renewable is expected to more than double by 2030. Thus, the company is focused on targeted investments in this sector to capitalize on this trend and make it a bigger part of its portfolio in the future.
Last month, Timken reported record earnings and revenues in first-quarter 2022, surpassing the Zacks Consensus Estimate on both counts. Both the bottom and the top line increased year over year.
Timken expects higher demand across most end markets in the current year. It anticipates total revenues to be up around 8% in 2022 from 2021 levels. Both Mobile and Process Industries segments are anticipated to be up double-digits organically. Adjusted earnings per share for the year are expected to be between $5.00 and $5.40. The mid-point of the guided range indicates year-over-year growth of 10%. Apart from strong demand, earnings growth will be supported by benefits from price realization and growth initiatives. The ongoing supply chain challenges and inflationary cost pressure are likely to be offset by significant price realization and operational excellence initiatives.
Price Performance
In the past year, shares of Timken have lost 30.9% compared with the industry’s decline of 27%.
Image Source: Zacks Investment Research
Zacks Rank and Stocks to Consider
Timken currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Graphic Packaging Holding Company GPK, Myers Industries MYE and Packaging Corporation of America PKG. While GPK and MYE flaunt a Zacks Rank #1 (Strong Buy), PKG carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.
Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 14.8% in a year.
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 13% in the past year.
Packaging Corporation has an expected earnings growth rate of 16.2% for 2022. The Zacks Consensus Estimate for the current year’s earnings rose 4.2% in the past 60 days.
PKG has a trailing four-quarter earnings surprise of 19.6%, on average. Packaging Corporation’s shares have gained 4% in the past year.
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
Packaging Corporation of America (PKG) : Free Stock Analysis Report
Timken Company The (TKR) : Free Stock Analysis Report
Graphic Packaging Holding Company (GPK) : Free Stock Analysis Report
Myers Industries, Inc. (MYE) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
