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Why Is Barnes Group (B) Up 2.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for Barnes Group (B - Free Report) . Shares have added about 2.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Barnes Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Barnes Q2 Earnings Surpass Estimates, Revenues Miss
Barnes Group reported mixed results for second-quarter 2020, wherein earnings surpassed estimates, while revenues lagged the same.
The company’s adjusted earnings in the reported quarter were 27 cents per share. This surpassed the Zacks Consensus Estimate of 20 cents. However, the bottom line declined 64% on a year-over-year basis.
Top-Line Results
In the reported quarter, Barnes’ revenues decreased 37% year over year to $235.5 million. While organic sales in the quarter declined 32% year over year, divestitures and forex woes had an adverse impact of 4% and 1%, respectively.
The company’s revenues missed the Zacks Consensus Estimate of $243 million.
Barnes reports net sales under two heads — Industrial and Aerospace. A brief snapshot of the segmental sales is provided below:
Net sales generated from Industrial amounted to $165 million, declining 29% year over year. The segment suffered from weakness in automotive and industrial end markets, and the coronavirus outbreak-related issues. Organic sales were down 22% year over year, while forex woes had an adverse impact of 1%. Divestiture of the Seeger business had a negative impact of 6%.
Aerospace’s sales were $70.5 million in the second quarter, down 49% year over year. Original equipment manufacturing net sales declined 52%, while aftermarket net sales fell 42% on account of persistent softness in aerospace end markets.
Margin Profile
In the reported quarter, Barnes’ cost of sales decreased 38.3% year over year to $147.1 million. Notably, cost of sales represented 62.5% of net sales versus 64.1% in the year-ago quarter. Selling and administrative expenses increased 2.6% year over year to $78.4 million, and represented 33.3% of net sales.
Adjusted operating income in the quarter declined 52% year over year to $27.8 million, while margin contracted 390 basis points to 11.8%. Interest expenses totaled $3.9 million in the reported quarter, down 27.8% year over year.
Balance Sheet & Cash Flow
Exiting the second quarter, Barnes’ cash and cash equivalents were $74.2 million, down 34.2% from $112.8 million recorded in the last reported quarter. Long-term debt was $711.4 million, reflecting a 9.2% decline from $783.4 million in the last reported quarter.
In the first six months of 2020, it generated net cash of $123.1 million from operating activities, up 13.8% from the comparable period of the previous year. Capital expenditure totaled $19.8 million, decreasing 22% year over year. Free cash flow was $103.3 million versus $82.7 million reported a year ago.
During the quarter, Barnes paid out dividends amounting to $8.1 million, in line with the year-ago quarter’s disbursement. Notably, the company refrained from repurchasing any shares in the quarter.
Outlook
For the third quarter of 2020, the company anticipates adjusted earnings of $0.22-$0.32 per share, suggesting a decline of 69.7% at the mid-point from the year-ago reported figure.
Organic sales for the third quarter are predicted to decline about 30% on a year-over-year basis. Operating margin is predicted to be 10% in the quarter.
However, on uncertainties, regarding the impacts of the coronavirus outbreak on financial and operating results, the company has not provided its guidance for 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -12.28% due to these changes.
VGM Scores
Currently, Barnes Group has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Barnes Group has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is Barnes Group (B) Up 2.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Barnes Group (B - Free Report) . Shares have added about 2.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Barnes Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Barnes Q2 Earnings Surpass Estimates, Revenues Miss
Barnes Group reported mixed results for second-quarter 2020, wherein earnings surpassed estimates, while revenues lagged the same.
The company’s adjusted earnings in the reported quarter were 27 cents per share. This surpassed the Zacks Consensus Estimate of 20 cents. However, the bottom line declined 64% on a year-over-year basis.
Top-Line Results
In the reported quarter, Barnes’ revenues decreased 37% year over year to $235.5 million. While organic sales in the quarter declined 32% year over year, divestitures and forex woes had an adverse impact of 4% and 1%, respectively.
The company’s revenues missed the Zacks Consensus Estimate of $243 million.
Barnes reports net sales under two heads — Industrial and Aerospace. A brief snapshot of the segmental sales is provided below:
Net sales generated from Industrial amounted to $165 million, declining 29% year over year. The segment suffered from weakness in automotive and industrial end markets, and the coronavirus outbreak-related issues. Organic sales were down 22% year over year, while forex woes had an adverse impact of 1%. Divestiture of the Seeger business had a negative impact of 6%.
Aerospace’s sales were $70.5 million in the second quarter, down 49% year over year. Original equipment manufacturing net sales declined 52%, while aftermarket net sales fell 42% on account of persistent softness in aerospace end markets.
Margin Profile
In the reported quarter, Barnes’ cost of sales decreased 38.3% year over year to $147.1 million. Notably, cost of sales represented 62.5% of net sales versus 64.1% in the year-ago quarter. Selling and administrative expenses increased 2.6% year over year to $78.4 million, and represented 33.3% of net sales.
Adjusted operating income in the quarter declined 52% year over year to $27.8 million, while margin contracted 390 basis points to 11.8%. Interest expenses totaled $3.9 million in the reported quarter, down 27.8% year over year.
Balance Sheet & Cash Flow
Exiting the second quarter, Barnes’ cash and cash equivalents were $74.2 million, down 34.2% from $112.8 million recorded in the last reported quarter. Long-term debt was $711.4 million, reflecting a 9.2% decline from $783.4 million in the last reported quarter.
In the first six months of 2020, it generated net cash of $123.1 million from operating activities, up 13.8% from the comparable period of the previous year. Capital expenditure totaled $19.8 million, decreasing 22% year over year. Free cash flow was $103.3 million versus $82.7 million reported a year ago.
During the quarter, Barnes paid out dividends amounting to $8.1 million, in line with the year-ago quarter’s disbursement. Notably, the company refrained from repurchasing any shares in the quarter.
Outlook
For the third quarter of 2020, the company anticipates adjusted earnings of $0.22-$0.32 per share, suggesting a decline of 69.7% at the mid-point from the year-ago reported figure.
Organic sales for the third quarter are predicted to decline about 30% on a year-over-year basis. Operating margin is predicted to be 10% in the quarter.
However, on uncertainties, regarding the impacts of the coronavirus outbreak on financial and operating results, the company has not provided its guidance for 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -12.28% due to these changes.
VGM Scores
Currently, Barnes Group has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Barnes Group has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.