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Barnes Group, Inc. (B)
Q3 2018 Earnings Conference Call
October 26, 2018 08:30 AM ET
Patrick Dempsey - President and Chief Executive Officer
Chris Stephens - SVP, Finance and Chief Financial Officer
Michael Ciarmoli - SunTrust Robinson Humphrey, Inc.
Edward Marshall - Sidoti & Company
Christopher Glynn - Oppenheimer & Co. Inc.
Matt Summerville - D.A. Davidson & Co.
Josh Chan - Robert W. Baird & Co.
Myles Walton - UBS Investment Bank
Previous Statements by B
» Barnes Group, Inc. (B) CEO Patrick Dempsey on Q2 2018 Results - Earnings Call Transcript
» Barnes' (B) CEO Patrick Dempsey on Q2 2016 Results - Earnings Call Transcript
» Barnes Group's (B) CEO Patrick Dempsey on Q4 2017 Results - Earnings Call Transcript
Chris Stephens, Senior Vice President of Finance and Chief Financial Officer, you may begin your conference.
All right. Great. Good. Good morning, everybody. So I’m joined by Barnes Group's President and Chief Executive Officer, Patrick Dempsey. And thank you for joining us for our third quarter 2018 earnings call.
If you have not received a copy of our earnings press release, you can find it on the Investor Relations section of our corporate Web site at bginc.com. During our call, we will be referring to the earnings release supplement slides, which are also on our Web site.
For our discussion today, includes certain non-GAAP financial measures, which provide additional information, we believe, is helpful to investors. These measures have been reconciled to the related GAAP measures in accordance with SEC regulations. You will find a reconciliation table on our Web site as part of our press release and in the Form 8-K submitted to the Securities and Exchange Commission.
Be advised that certain statements we make on today's call both during the opening remarks and during the question-and-answer session may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Please consider the risks and uncertainties that are mentioned in today's call and are described in our periodic filings with the SEC. These filings are available through the Investor section of our corporate Web site.
Let me now turn the call over to Patrick, for opening remarks. Then, I will provide a review of our third quarter results and our updated 2018 outlook. After that, we will open-up the call to questions. Patrick?
Thanks, Chris, and good morning, everyone. In the third quarter, Barnes Group delivered solid performance as adjusted earnings per share grew from $0.66 last year to $0.78 this year, up 18%. Again, we experienced another strong quarter with sustained strength in our Aerospace segment and year-over-year margin expansion in both our segments.
For the company, adjusted operating margins expanded 250 basis points from prior year period to 16.4%. And we ended the quarter with a total backlog of $1.2 billion. In line with the ongoing transformation of our portfolio, we made a meaningful strategic announcement in the quarter when we entered into a definitive agreement to acquire Gimatic, a leading supplier of mission-critical solutions for industrial automation and robotics applications.
Gimatic designs and develops robotic grippers, advanced end of arm tooling systems, sensors and other automation components for various end markets, including automotive, packaging, healthcare, and food and beverage. We expect to close the deal in the near-term and as we’ve done in the past, we plan to hold a separate conference call to discuss Gimatic and the strategic and financial benefits we expect to gain from the acquisition as we look to 2019.
Now a few comments about this quarter's performance, starting with aerospace. Aerospace's impressive results have been sustained as sales were up 8% as compared to a year-ago with OEM up 3% and aftermarket up 19%. Our OEM business continues to deliver growth in support of the ramp of new engine programs, primarily driven by the growing backlog of the lead family of engines for the Airbus A320neo and Boeing 737 MAX. These new programs are coming down the learning curve and contributing nicely to overall performance.
Our aftermarket business is experiencing robust sales growth, both in MRO and spare parts, fueled by the CFM and CF6 family of engines as industry fundamentals remain strong. For 2018, we expect OEM sales growth to be up mid single digits. OEM backlog remains close to the record level reached in Q2, up 14% versus prior year and orders year-to-date are up 6%, positioning us for our future growth.
For our aftermarket business, our 2018 outlook has improved from our view last quarter. We see MRO revenues to be up low teens consistent with last quarter's full-year outlook and we now expect spare parts to be up high teens, which is an increase from our prior view.
Our operating margin outlook for our Aerospace segment is now expected to be approximately 20%, up from our previous outlook of high teens, primarily driven by the strong growth experienced in our aerospace aftermarket business throughout 2018. Overall, in our aerospace business we're excited not only about our results in 2018, but also about our progress in solidifying content on a number of long-term strategic aircraft and engine programs, including the GE9X and Trent 7000.
Within our Industrial segment, total sales and organic sales were up 2% over the prior year period. Sales growth was driven by continued strength in medical, personal care, packaging and general industrial, partially offset by declines in transportation and tool and die end markets. Overall orders were down 11% due in part to the dampening effect of lower global automotive production outlooks and the disruptive impact tariffs are having on the timing of new projects.