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Barnes Group (B) Q2 Earnings Surpass, Revenues Miss Mark

·5 min read

Barnes Group Inc. B reported mixed second-quarter 2022 results, wherein its earnings surpassed estimates by 16.7%. However, sales missed the same by 2%.

Its adjusted earnings in the reported quarter were 56 cents per share, surpassing the Zacks Consensus Estimate of 48 cents. Also, the bottom line increased 24.4% from the year-ago quarter’s figure of 45 cents.

Top-Line Results

In the reported quarter, Barnes’ net sales of 321.3 million were flat year over year. Organic sales in the quarter grew 5% on strengthening segmental businesses.

B’s revenues missed the Zacks Consensus Estimate of $328 million.

Barnes reports revenues under two heads, namely Industrial and Aerospace. A brief snapshot of the segmental sales is provided below:

Revenues generated from Industrial amounted to $212.1 million, decreasing 9.6% year over year. The segment suffered adverse impacts of inflation, supply-chain issues and lower productivity. Organic sales were down 3% year over year, and movements in foreign currencies had a negative impact of 6%.

Aerospace’s sales were $109.2 million in the second quarter, up 26.2% from the year-ago quarter’s level on the back of an improvement in the aerospace markets.

Aftermarket sales were up 55% year over year, while the same for original equipment manufacturing increased 14%.

Barnes Group, Inc. Price and Consensus

Barnes Group, Inc. Price and Consensus
Barnes Group, Inc. Price and Consensus

Barnes Group, Inc. price-consensus-chart | Barnes Group, Inc. Quote

Margin Profile

In the reported quarter, Barnes’ cost of sales increased 4.7% year over year to $212.8 million. The cost of sales represented 66.2% of net sales compared with 63.3% in the year-ago quarter. Selling and administrative expenses decreased 13.8% to $68.5 million and represented 21.3% of net sales.

Adjusted operating income in the reported quarter increased 2% year over year to $40.1 million, whereas margins increased 30 basis points to 12.5%. Growth in sales was offset by inflationary headwinds, increasing interest rates and supply-chain challenges. Interest expenses totaled $3.3 million in the reported quarter, down 25.7% year over year.

The adjusted effective tax rate in the reported quarter was 22.8%, lower than 25.3% a year ago.

Balance Sheet & Cash Flow

While exiting the second quarter, Barnes’ cash and cash equivalents were $72.3 million, down 29.7% from $102.9 million recorded in the fourth quarter of 2021. Long-term debt was $582.5 million, reflecting a 2.9% decline from $599.9 million in the fourth quarter of 2021.

In the first six months of 2022, B repaid a long-term debt of $70.4 million. Proceeds from the issuance of long-term debts were $80 million. Liquidity available in the quarter included cash of $72.3 million and credit under revolving facilities of $521 million.

In the first six months of 2022, Barnes generated net cash of $8.5 million from operating activities compared with $85.7 million generated in the year-ago period. Capital expenditure totaled $13.5 million, decreasing 23.3%. Free cash outflow was $5 million compared with free cash inflow of $68.2 million a year ago.

In the first six months of the year, Barnes paid out dividends of $16.2 million, flat year over year.

Outlook

For 2022, Barnes anticipates adjusted earnings of $1.90-$2.05 per share compared with $2.20-$2.40 predicted earlier.

Organic sales for the year are expected to rise 5-6% from the year-ago reported figure compared with 8-10% anticipated earlier. Adverse movements in foreign currencies are expected to hurt sales 3%.

The adjusted operating margin is predicted to be 11-12%, down from 12.5-13.5% anticipated earlier due to the lackluster performance of the Industrial segment and macroeconomic headwinds. Barnes anticipates a capital expenditure of $40-$45 million. Cash conversion is expected to be approximately 100% of net income. The effective tax rate for 2022 is expected to be 24-25%.

Zacks Rank & Stocks to Consider

Barnes currently carries a Zacks Rank #4 (Sell).

Some better-ranked companies from the industrial products sector are discussed below:

Greif, Inc. GEF presently sports a Zacks Rank #1 (Strong Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

GEF’s earnings estimates have increased 17.8% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 19.4% in the past six months.

Titan International, Inc. TWI presently flaunts a Zacks Rank of 1. Its earnings surprise in the last four quarters was 56.4%, on average.

In the past 60 days, TWI’s earnings estimates have increased 43.3% for 2022. The stock has surged 72.2% in the past six months.

Valmont Industries, Inc. VMI presently has a Zacks Rank #2 (Buy). VMI’s earnings surprise in the last four quarters was 13.7%, on average.

In the past 60 days, the stock’s earnings estimates have increased 3.8% for 2022. The stock has risen 26.8% in the past six months.


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