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Strength in Aerospace Segment Aids Barnes (B) Amid Cost Woes
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Barnes Group Inc. (B - Free Report) is benefiting from the strong performance of the Aerospace segment. The wear and tear from the increased use of older planes in the commercial market, particularly with narrowbody engines like the CFM56 and V2500, is aiding the after-market sales. The company has stepped up the production of both narrow-body airframes and wide-body airframes, and its maintenance, repair and overhaul (MRO) activity is strong. This underlying strength, along with the MB Aerospace acquisition, fueled the segment’s 89% year-over-year revenue growth in the first quarter.
Barnes is poised to benefit from its well-diversified portfolio. Its investments in product development, new technologies and manufacturing processes are anticipated to boost this portfolio over the long term. For instance, the April 2024 expansion of its MRO facility in East Granby will help it cater to the increasing demand for existing and new engine programs and product lines. Similarly, the February 2024 unveiling of a component repair facility in Singapore will support growing demand in the region.
Barnes has been strengthening its business through acquisitions. In August 2023, the company completed the acquisition of MB Aerospace, thus expanding the global OEM offering and aftermarket repair capabilities of its aerospace business. The largest acquisition in its history, it enhanced Barnes’ ability to deliver value-add solutions across the aero-engine value chain, broadened its customer relationships and increased its exposure to the defense industry. In the first quarter, the acquisition contributed revenues of $82.2 million to the Aerospace segment.
In the year-to-date period, shares of the Zacks Rank #3 (Hold) company have gained 21.5% compared with the industry’s 3.7% growth.
Image Source: Zacks Investment Research
Barnes has been witnessing weakness in the Industrial segment owing to the slowdown in the broader economy and supply-chain challenges. The impact of this slowdown is reflected in the softness in its molding solutions, motion control solutions and automation businesses. Demand for products like hot runner and soft tool has been particularly weak. Amid these challenges, its first-quarter revenues declined 4% on a year-over-year basis. Continued softness in the transportation, personal care and packaging end markets may impact the segment’s performance in the near term.
The company has been dealing with the adverse impacts of the high cost of sales. Increases in the cost of labor, materials, fuel, freight and shipping are pushing up the cost of sales, which surged 32.6% year over year in the first quarter. This drove up the cost of sales as a percentage of revenues by 220 basis points to 69.7%. This is in accordance with the trend established in the preceding three quarters, when expenses increased 44%, 21.5% and 5.6%, respectively. We expect the company’s cost of sales to increase 7.9% year over year in 2024.
Stocks to Consider
Some better-ranked companies from the Industrial Products sector are discussed below:
The Zacks Consensus Estimate for BDC’s 2024 earnings has increased 8.3% in the past 60 days. Shares of Belden have gained 24.3% in the year-to-date period.
Applied Industrial Technologies, Inc. (AIT - Free Report) currently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 8.2%.
The consensus estimate for AIT’s fiscal 2024 earnings has improved 1.4% in the past 60 days. The stock has risen 8.9% in the year-to-date period.
Crane Company (CR - Free Report) presently has a Zacks Rank of 2. CR delivered a trailing four-quarter earnings surprise of 15.2%, on average.
The Zacks Consensus Estimate for CR’s 2024 earnings has increased 4.2% in the past 60 days. Its shares have gained 21.4% in year to date.
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Strength in Aerospace Segment Aids Barnes (B) Amid Cost Woes
Barnes Group Inc. (B - Free Report) is benefiting from the strong performance of the Aerospace segment. The wear and tear from the increased use of older planes in the commercial market, particularly with narrowbody engines like the CFM56 and V2500, is aiding the after-market sales. The company has stepped up the production of both narrow-body airframes and wide-body airframes, and its maintenance, repair and overhaul (MRO) activity is strong. This underlying strength, along with the MB Aerospace acquisition, fueled the segment’s 89% year-over-year revenue growth in the first quarter.
Barnes is poised to benefit from its well-diversified portfolio. Its investments in product development, new technologies and manufacturing processes are anticipated to boost this portfolio over the long term. For instance, the April 2024 expansion of its MRO facility in East Granby will help it cater to the increasing demand for existing and new engine programs and product lines. Similarly, the February 2024 unveiling of a component repair facility in Singapore will support growing demand in the region.
Barnes has been strengthening its business through acquisitions. In August 2023, the company completed the acquisition of MB Aerospace, thus expanding the global OEM offering and aftermarket repair capabilities of its aerospace business. The largest acquisition in its history, it enhanced Barnes’ ability to deliver value-add solutions across the aero-engine value chain, broadened its customer relationships and increased its exposure to the defense industry. In the first quarter, the acquisition contributed revenues of $82.2 million to the Aerospace segment.
In the year-to-date period, shares of the Zacks Rank #3 (Hold) company have gained 21.5% compared with the industry’s 3.7% growth.
Image Source: Zacks Investment Research
Barnes has been witnessing weakness in the Industrial segment owing to the slowdown in the broader economy and supply-chain challenges. The impact of this slowdown is reflected in the softness in its molding solutions, motion control solutions and automation businesses. Demand for products like hot runner and soft tool has been particularly weak. Amid these challenges, its first-quarter revenues declined 4% on a year-over-year basis. Continued softness in the transportation, personal care and packaging end markets may impact the segment’s performance in the near term.
The company has been dealing with the adverse impacts of the high cost of sales. Increases in the cost of labor, materials, fuel, freight and shipping are pushing up the cost of sales, which surged 32.6% year over year in the first quarter. This drove up the cost of sales as a percentage of revenues by 220 basis points to 69.7%. This is in accordance with the trend established in the preceding three quarters, when expenses increased 44%, 21.5% and 5.6%, respectively. We expect the company’s cost of sales to increase 7.9% year over year in 2024.
Stocks to Consider
Some better-ranked companies from the Industrial Products sector are discussed below:
Belden Inc. (BDC - Free Report) presently has a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 14.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for BDC’s 2024 earnings has increased 8.3% in the past 60 days. Shares of Belden have gained 24.3% in the year-to-date period.
Applied Industrial Technologies, Inc. (AIT - Free Report) currently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 8.2%.
The consensus estimate for AIT’s fiscal 2024 earnings has improved 1.4% in the past 60 days. The stock has risen 8.9% in the year-to-date period.
Crane Company (CR - Free Report) presently has a Zacks Rank of 2. CR delivered a trailing four-quarter earnings surprise of 15.2%, on average.
The Zacks Consensus Estimate for CR’s 2024 earnings has increased 4.2% in the past 60 days. Its shares have gained 21.4% in year to date.