Barnes Group Gains From Buyout, Pandemic-Related Woes Persist

On Sep 29, we issued an updated research report on Barnes Group, Inc. B.

In the past three months, this Zacks Rank #3 (Hold) stock has lost 9% compared with the industry’s growth of 9.4%.

Present Scenario

Barnes Group has been benefiting from the buyout of Gimatics (closed in October 2018). Notably, Gimatics’ patented technologies and intellectual property-based solutions have strengthened the company’s portfolio of robotic technology solutions in the industrial automation market.

Also, the company remains focused on rewarding shareholders handsomely through dividend payouts and share buybacks. In the first half of 2020, the company returned $31.7 million of cash to shareholders through dividend payouts and share buybacks. Notably, exiting the second quarter of 2020, the company possessed the authorization to repurchase 3.7 million worth of common stock under its existing stock repurchase authorization program. Owing to uncertain economic environment caused by the coronavirus outbreak, it has suspended its share repurchase activity for the time being.

Moreover, Barnes Group has successfully lowered its debt burden over the past year. Exiting 2019, the company's long-term debt declined 11.9% on a year-over-year basis. Further, the metric fell 9.2% on a sequential basis in the second quarter. The company’s continuous efforts to lower debt will be advantageous, going forward.

However, Barnes Group has been witnessing weakness in the global manufacturing market. In the second quarter, its Industrial segment’s sales declined 29% on a year-over-year basis. This was due to softness in automotive and industrial end markets owing to low order intakes, caused mostly by the coronavirus outbreak-led issues. For 2020, the company expects a 20% year-over-year decline in global automotive production.

Also, in the second quarter, the Aerospace segment’s sales were down 49% year over year. It expects reduced aircraft utilization and lower aircraft demand to continue to affect the Aerospace segment’s aftermarket and OEM businesses’ performance in the upcoming quarters. The company’s organic sales are likely to decline 30% in third-quarter 2020 on a year-over-year basis.

Key Picks

Some better-ranked companies from the same space are Tennant Company TNC, Altra Industrial Motion Corp. AIMC and Dover Corporation DOV. While Tennant currently sports a Zacks Rank #1 (Strong Buy), Altra Industrial and Dover carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tennant delivered a positive earnings surprise of 107.12%, on average, in the trailing four quarters.

Altra Industrial delivered a positive earnings surprise of 31.43%, on average, in the trailing four quarters.  

Dover delivered a positive earnings surprise of 13.71%, on average, in the trailing four quarters.

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