Barnes Group Inc. B recently entered into an agreement with One Equity Partners for the divestment of its Associated Spring and Hänggi businesses. The deal, valued at $175 million, includes a $15 million seller promissory note set to mature in two years. Barnes expects to utilize the net cash proceeds from the transaction, worth $150 million, to reduce the debt incurred from the MB Aerospace buyout in August 2023.
The company’s shares increased 4.5% yesterday, ending the trading session at $31.77.
Based in New York, One Equity Partners is a middle-market private equity company with assets under management of more than $10 billion. The firm primarily invests in the industrial, technology and healthcare sectors in North America and Europe.
Inside the Headlines
Barnes’ Associated Spring and Hänggi units are leading players in engineered spring and precision metal component manufacturing, micro-stamping, progressive stamping and fine blanking spaces. These businesses primarily serve general industrial, automotive and other end markets. As part of the Industrial segment’s Motion Control Solutions business, Associated Spring and Hänggi units generated $200 million in revenues over the past 12 months.
This divestment agreement is in sync with the company’s business transformation strategy, which includes disposing of businesses to unlock values for its shareholders. The divestiture will enable Barnes to focus more on its core business and rebalance its portfolio toward the Aerospace segment. With the divestment, the company will materially reduce its exposure to the automotive sector.
Barnes believes that the divestment, along with its buyout of MB Aerospace, will enable it to shift its business portfolio toward higher growth and margin markets. On completion of the transaction, B’s Aerospace segment will have the highest contribution toward consolidated revenues with a greater percentage of earnings.
The completion of the transaction, which is expected in early 2024, is subject to certain customary closing conditions and approvals.
Zacks Rank & Price Performance
Barnes, with a $1.6 billion market capitalization, currently carries a Zacks Rank #3 (Hold). The company is likely to benefit from strength in the Aerospace segment, driven by solid demand across aerospace aftermarket and aerospace Original Equipment Manufacturing businesses. However, rising costs and expenses due to high raw material costs remain a concern.
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B’s shares have lost 3.5% against the industry’s growth of 12.3% in the past three months.
The Zacks Consensus Estimate for B’s current-year earnings has declined 0.6% over the last 30 days.
3 Promising Stocks
We have highlighted three better-ranked stocks from the same space, namely Applied Industrial Technologies AIT, Crane Company CR and Flowserve Corporation FLS, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Applied Industrial delivered a trailing four-quarter average earnings surprise of 13.9%. In the past 30 days, the consensus estimate for AIT’s 2023 earnings has been stable. The stock has risen 5.8% in the past three months.
Crane delivered a trailing four-quarter average earnings surprise of 29.8%. In the past 30 days, the Zacks Consensus Estimate for CR’s 2023 earnings has remained stable. Shares of CR have rallied 29.2% in the past three months.
Flowserve has a trailing four-quarter average earnings surprise of 27.3%. The consensus estimate for FLS’ 2023 earnings has remained unchanged in the past 30 days. Shares of the company have increased 5.9% in the past three months.
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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.
