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Barnes (B) Beats Q1 Earnings Estimates, Revises '18 View


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Barnes Group Inc.B reported impressive results for first-quarter 2018, with earnings surpassing estimates by 7.46%. Including the first-quarter results, the average earnings surprise for the last four trailing quarters was 6.23%.

The machinery company's adjusted earnings in the reported quarter were 72 cents per share, above the Zacks Consensus Estimate of 67 cents. Also, the bottom line grew 1.4% from the year-ago tally of 71 cents.

Segmental Businesses Drive Net Sales

In the reported quarter, Barnes' net sales amounted to $366.7 million, reflecting year-over-year growth of 7.3%. The improvement was driven by 1% gain from organic sales growth, 1% benefit from acquired assets and 5% positive impact from foreign-currency movements.

Also, the top line surpassed the Zacks Consensus Estimate of $364 million by roughly 0.6%.

The company reports revenues under the segments given below:

Revenues from the Industrial segment were approximately $246 million, increasing 8.2% from the year-ago quarter. Results improved on the back of 1% gain from acquired assets and 8% positive impact from foreign currency translations, partially offset by 1% decline in organic growth.

Revenues from the Aerospace segment totaled $120.7 million, rising 5.4% year over year. The improvement came on the back of 1% growth in sales, derived from original equipment manufacturing (OEM), and 19% growth in sales resulting from maintenance, repair and overhaul (MRO) activities along with sales from the spare parts business.

Backlog (Aerospace OEM) at the reported quarter-end stood at $733 million, increasing 8% growth over the year-ago quarter.

Margin Profile Weakens

In the quarter under review, Barnes' cost of sales grew 8% year over year to $237.1 million. It was 64.7% of net sales versus 64.2% in the first quarter of 2017. Selling and administrative expenses, which was roughly 19.9% of the net sales, increased 10.5% year over year to $72.9 million.

Adjusted operating income slipped 40 basis points (bps) year over year to $56.6 million, while margin slipped 120 bps to 15.4%. Interest expense increased 16.2% year over year to $3.9 million.

Balance Sheet and Cash Flow

Exiting first-quarter 2018, Barnes' cash and cash equivalents were $104.7 million, down from $145.3 million at the previous quarter-end. Long-term debt balance decreased 4.3% sequentially to $503.2 million.

In the quarter under review, the company's net cash generation from operating activities totaled $30.5 million, down 41.2% from the year-ago quarter. Capital spending totaled $11.2 million versus $11.7 million in the year-ago quarter. Free cash flow in the quarter under review was $19.3 million, down 51.9% from the year-ago quarter.

During the reported quarter, the company paid dividend totaling $7.5 million and repurchased shares worth $33.5 million.

Outlook

For 2018, Barnes Group anticipates gaining from strengthening end markets and initiatives directed to enhance operational efficiency.

Earnings per share are anticipated to be $3.03-$3.15, up from the previous expectation of $2.98-$3.13. The revised projection reflects year-over-year growth of 5-9%. Total revenues are projected to grow 5-6% versus the earlier forecast of 4-6%. Organic sales are predicted to grow 3-4% versus an earlier projection of 3-5%. Favorable foreign currency translation is predicted to have 2% positive impact on sales versus an earlier anticipation of 1%.

On a segmental basis, sales are predicted to grow in mid-single digit for Molding Solutions, low-single digit for Nitrogen Gas Products and remain flat for Engineered Components. Combining these, sales for the Industrial segment is predicted to grow in low-single to mid-single digit in 2018.

Likewise, for the Aerospace segment, sales are anticipated to grow in high-single digit in 2018. These include high-single-digit growth for OEM and MRO businesses while growing in a mid-single to high-single digit for Spare Parts business.

Operating margin is anticipated to be 15.5-16.5% while the effective tax rate is projected to be 25-25.5% versus the prior forecast of 25-26%. Capital expenditures are predicted to be around $60-$65 million while cash conversion will be above 100% of net income.

Barnes Group, Inc. Price, Consensus and EPS Surprise

Barnes Group, Inc. Price, Consensus and EPS Surprise | Barnes Group, Inc. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of approximately $2.9 billion, Barnes Group currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industry are DXP Enterprises, Inc. DXPE , Tennant Company TNC and IDEX Corporation IEX . While both DXP Enterprises and Tennant sport a Zacks Rank #1 (Strong Buy), IDEX Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

In the last 60 days, earnings estimates for each of these stocks improved for the current year. Also, average positive earnings surprise for last four quarters was 189.56% for DXP Enterprises, 1.39% for Tennant and 4.80% for IDEX Corporation.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: B , DXPE , IEX , TNC


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