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Barnes Group (B) Q1 Earnings & Revenues Surpass Estimates

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Barnes Group Inc. (B - Free Report) reported solid first-quarter 2022 results, wherein its earnings surpassed estimates by 5.1% and sales topped the same by 2.8%.

Its adjusted earnings in the reported quarter were 41 cents per share, surpassing the Zacks Consensus Estimate of 39 cents. Also, the bottom line increased 7.9% from the year-ago quarter figure of 38 cents on the back of higher sales generation.

Top-Line Results

In the reported quarter, Barnes’ net sales increased 4% year over year to $312.4 million. Organic sales in the quarter grew 6% on strengthening segmental businesses.

The company’s revenues beat the Zacks Consensus Estimate of $304 million.

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

Revenues generated from Industrial amounted to $212 million, decreasing 4% year over year. The segment suffered from adverse impacts of inflation, supply chain issues and lower productivity. Organic sales were down 1% year over year, and movements in foreign currencies had a negative impact of 3%.

Aerospace’s sales were $101 million in the first quarter, up 23% from the year-ago quarter on the back of improvement in the aerospace markets.

Aftermarket sales were up 34% year over year, while that for original equipment manufacturing increased 18%.

Barnes Group, Inc. Price, Consensus and EPS Surprise

Barnes Group, Inc. Price, Consensus and EPS Surprise

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

Margin Profile

In the reported quarter, Barnes’ cost of sales increased 6.4% year over year to $207.2 million. The cost of sales represented 66.3% of net sales versus 64.6% in the year-ago quarter. Selling and administrative expenses decreased 0.6% to $74.1 million and represented 23.7% of net sales.

Adjusted operating income in the reported quarter decreased 1.9% year over year to $31.8 million, whereas margins decreased 50 basis points to 10.2%. Growth in sales was offset by inflationary headwinds, supply chain challenges and pandemic-related operational disruptions. Interest expenses totaled $3.6 million in the reported quarter, down 9.5% year over year.

The effective tax rate in the reported quarter was 21%, lower than 28.1% a year ago.

Balance Sheet & Cash Flow

Exiting the fourth quarter, Barnes’ cash and cash equivalents were $75.3 million, down 26.9% from $102.9 million recorded in the last reported quarter. Long-term debt was $595 million, reflecting a 0.8% decline from $599.9 million in the last reported quarter.

In the first three months of 2022, the company repaid long-term debt of $34.9 million. Proceeds from the issuance of long-term debts were $35 million. Liquidity available in the quarter included cash of $75 million and credit under revolving facilities of $510 million.

In the first three months of 2022, the company used net cash of $0.9 million from operating activities compared with $35.6 million generated in the year-ago period. Capital expenditure totaled $7.4 million, decreasing 6.3%. Free cash outflow was $16.7 million versus free cash flow of $27.8 million in a year ago.

In the first three months of the year, Barnes paid out dividends of $8.1 million, flat year over year.

Outlook

For 2022, Barnes anticipates adjusted earnings of $2.20-$2.40, suggesting a year-over-year increase of 18.6% on a mid-point basis.

Organic sales for the year are expected to rise 8-10% on a year-over-year basis. Movements in foreign currencies are expected to hurt sales by 2%.

The adjusted operating margin is predicted to be 12.5-13.5%. The company anticipates a capital expenditure of $50-$55 million. Cash conversion is expected to exceed 100% of net income. The effective tax rate for 2022 is expected to be 24-25%.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #4 (Sell).

Some better-ranked companies are discussed below.

AZZ Inc. (AZZ - Free Report) presently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise for the last four quarters was 22.3%, on average.

AZZ’s earnings estimates increased 12.6% for fiscal 2022 (ending February 2022) in the past 60 days. Its shares have lost 5.4% in the past three months.

Graphic Packaging Holding Company (GPK - Free Report) presently sports a Zacks Rank #1. Its earnings surprise in the last four quarters was 7.2%, on average.

In the past 60 days, GPK’s earnings estimates have increased 8.1% for 2022. The stock has rallied 16.7% in the past three months.

Ferguson plc (FERG - Free Report) presently carries a Zacks Rank of 2 (Buy). FERG delivered a trailing four-quarter earnings surprise of 14.2%, on average.

Earnings estimates of Ferguson have increased 6.5% for fiscal 2022 (ending July 2022) in the past 60 days. FERG’s shares have declined 20.9% in the past three months.

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