Barnes Group Inc. (B Quick QuoteB - Free Report) reported second-quarter 2023 adjusted earnings (excluding 24 cents from non-recurring items) of 58 cents per share, which surpassed the Zacks Consensus Estimate of 54 cents. The bottom line increased 3.6% year over year.

Inside the Headlines

Total revenues of $339 million underperformed the Zacks Consensus Estimate of $340 million. However, the top line increased 5.5% year over year, with organic sales growth of 5%, while favorable foreign currency movements aided sales by 0.5%.

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

Revenues from Industrial amounted to $217 million, up 2% year over year. Organic sales were up 2% year over year and favorable foreign currency movements increased sales by 1%. Our estimate for segmental revenues was $220.2 million.

The Aerospace segment’s sales totaled $122 million in the second quarter, up 12% from the year-ago quarter. The upside was due to an 8% increase in Aerospace original equipment manufacturing ("OEM") sales and an 18% rise in aftermarket sales. Our estimate for segmental revenues was $117 million.

Margin Profile

In the reported quarter, Barnes’ cost of sales increased 5.6% year over year to $224.6 million. Selling and administrative expenses climbed 29% to $88.4 million.

Adjusted operating income jumped 8% year over year to $43.5 million, while the margin improved 30 basis points.

Balance Sheet & Cash Flow

At the end of the second quarter, Barnes had cash and cash equivalents of $74.7 million compared with $76.9 million recorded at the end of 2022. Long-term debt was $564.9 million, down from $569.6 million at the end of 2022.

Liquidity available in the quarter included cash of $75 million and credit under revolving facilities of $537 million.

In the second quarter, Barnes generated net cash of $42.5 million from operating activities compared with $8.5 million consumed in the year-ago period. Capital expenditure totaled $21.6 million, up 60% from the year-ago quarter. Free cash flow was $20.9 million compared with negative $5 million a year ago.

In the second quarter, Barnes rewarded its shareholders with dividends of $16.2 million, nearly flat year over year.

2023 Outlook

Barnes expects organic sales growth of 7-9% for 2023 compared with 6-8% predicted earlier. Adjusted operating margin is estimated to be 12.5-13.5%.

B expects adjusted earnings to be $2.15-$2.30 per share. The guided range reflects a year-over-year increase of 9-16%. The mid-point of the guided range — $2.23 — lies above the Zacks Consensus Estimate of $2.22.

Barnes expects capital expenditures of approximately $50 million for 2023. Cash conversion is estimated to be approximately 100% of net income. The adjusted effective tax rate is forecasted to be 24-25% for 2023 compared with 24.5-25.5% predicted earlier.

Zacks Rank & Stocks to Consider

B currently carries a Zacks Rank #2 (Buy). Some better-ranked companies from the Industrial Products sector are discussed below:

Greif, Inc. (GEF Quick QuoteGEF - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.

GEF delivered a trailing four-quarter earnings surprise of 7.7%, on average. GEF’s earnings estimates have increased 13.4% for fiscal 2023 in the past 60 days. Its shares have risen 4.1% in the past year.

Caterpillar Inc. (CAT Quick QuoteCAT - Free Report) presently carries a Zacks Rank #2. CAT’s earnings surprise in the last four quarters was 14.3%, on average.

In the past 60 days, estimates for Caterpillar’s earnings have increased 1.4% for 2023. The stock has gained 33.7% in the past year.