Barnes Group Inc. B, a global manufacturer and provider of highly engineered products, and differentiated industrial technologies, seems to be witnessing a tough time in 2020. The company’s operational performance has been severely impacted by persistent difficult end-market conditions, owing to the coronavirus crisis and several other challenges.
Barnes Group, which has a market capitalization of roughly $2 billion, failed to impress investors with its recent financial results. Notably, in the second quarter of 2020, its adjusted earnings per share decreased 64% year over year on account of low order intakes across all business segments.
Year to date, this Zacks Rank #5 (Strong Sell) stock has lost 37.3% compared with the Zacks Manufacturing - General Industrial industry’s decline of 3.1%. Notably, the broader Zacks Industrial Products sector has declined 0.5%, while and S&P 500 has grown 8.1%, over the same time frame.
In addition, the Zacks Consensus Estimate for its 2020 earnings has trended down from $1.82 to $1.73 on two downward estimate revisions against none upward in the past 30 days. Over the same timeframe, the consensus estimate for 2021 earnings has trended down from $2.25 to $2.01 on three downward estimate revisions against none upward.
What is Ailing the Company?
Barnes Group has been witnessing persistent weakness in the global manufacturing market. In the second quarter, its Industrial segment’s sales declined 29% on a year-over-year basis due to softness in automotive and industrial end markets, owing to low order intakes, fuelled mostly by the coronavirus outbreak-led issues. In 2020, the company anticipates a 20% year-over-year decline in global automotive production. This remains a major concern for the top-line prospects of its Industrial segment in the quarters ahead.
Also, in the second quarter, the Aerospace segment’s sales were down 49% year over year. It expects reduced aircraft utilization and lower aircraft demand to continue to affect the performance of its Aerospace segment’s aftermarket and OEM businesses in the upcoming quarters. Notably, the company’s organic sales are anticipated to decline 30% in third-quarter 2020 on a year-over-year basis.
Owing to the uncertainties regarding the impacts of the pandemic on its operating results, Barnes Group refrained from providing financial guidance for 2020.
In addition, given the company’s extensive geographic presence across the world, its operations are prone to geopolitical risks and unfavorable movements in foreign currencies. For instance, in both the first and second quarters of 2020, foreign exchange headwinds hurt its top-line performance by 1%.
Amid such a scenario, we suggest considering four stocks, belonging to multiple industries under the ambit of Zacks Industrial Products sector, which are likely to offer good returns. These stocks either carry a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) and have strong growth prospects. You can see the complete list of today’s Zacks #1 Rank stocks here.
Fortune Brands Home Security, Inc. FBHS: The Deerfield, IL-based company specializes in the designing, manufacturing, and selling of home and security products. Year to date, shares of the Zacks Rank #1 company have rallied 31.1% compared with the Zacks Security and Safety Services industry’s rise of 1.4%. The Zacks Consensus Estimate for current-year earnings has been revised 22.1% upward over the past 30 days, while the same for 2021 earnings has increased 19.1%.
Fortune Brands will likely benefit from strength in the U.S. housing market, supported by expected new construction growth and product launches. Also, strength across its plumbing business, driven by a powerful suite of brands and the success of its category and channel expansion strategies, bodes well.
ABB Ltd ABB: Based in Zurich, Switzerland, ABB is a leading technology company. The Zacks Rank #2 stock has rallied 8.6% compared with the Zacks Manufacturing – Electronics industry’s rise 2.2% year to date. In the past 30 days, the Zacks Consensus Estimate for its 2020 earnings has been revised 6.7% upward, while the same for 2021 earnings has moved up 1.9%.
Notably, the company is poised to benefit from strength in its end markets, including distribution utilities, semiconductors, logistics, e-mobility, rail, data centers, and mining & mineral. Also, its organic growth investments and diligent cost-cutting initiatives are likely to improve its competency over time.
Regal Beloit Corporation RBC: Based in Beloit, WI, Regal Beloit is a leading manufacturer of electrical and mechanical motion control products. Year to date, shares of the Zacks Rank #2 company have rallied 16.3% compared with the Zacks Manufacturing – Electronics industry’s rise of 1.7%. The Zacks Consensus Estimate for current-year earnings has been revised 15.9% upward over the past 30 days, while the same for 2021 earnings has increased 5.4%.
It is well-positioned to gain from improving order trends, cost-control measures, existing restructuring and supply-chain efforts as well as reorganization actions apart from shareholder-friendly policies.
Roper Technologies, Inc. ROP: The Sarasota, FL-based company is a leading designer, manufacturer, and distributor of engineered products and solutions as well as software. The Zacks Rank #2 stock has rallied 22.1% against the Zacks Manufacturing - General Industrial industry’s decline of 3.3% year to date. In the past 30 days, the Zacks Consensus Estimate for its 2020 earnings has been revised 3.1% upward, while the same for 2021 earnings has moved up 10.6%.
The company will benefit from strength across its network software businesses along with a rise in demand for medical products. Also, high recurring revenue mix, strong customer retention, expanding networks, and strength across its DAT and ConstructConnect businesses bode well.
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