The Timken Company

Don't count out manufacturing just yet. The Timken Company ( TKR - Snapshot Report ) is still expected to grow earnings by 15.4% in 2012 even though it had a record 2011. This Zacks #1 Rank (Strong Buy) is also cheap with a forward P/E of just 9.6.

Timken manufactures antifriction bearings and power transmission products and services as well as alloy steel and components.

Its friction management and power transmission services a variety of markets including aerospace, automotive, consumer, energy, heavy industry, power generation and rail.

Timken is Investing in America

Even though Timken is a global company with a presence in 30 countries, on Feb 21, it announced it was investing $225 million in the Faircrest Steel Plant in Stark County, Ohio.

This comes on the heels of a new 5-year labor agreement with the United Steelworkers that covers 4 facilities in Stark County through Sep 2017.

"We are seeing growing demand for Timken specialty steel to support the most demanding energy and industrial applications," said Salvatore Miraglia, Jr., President.

"This is the right time to make the kind of investment that will improve our operating performance while also expanding our capacity and size range for these products," he added.

Timken Surprised by 3.7% in the Fourth Quarter

On Jan 26, Timken reported its fourth quarter and full year results and beat the Zacks Consensus Estimate by 4 cents. The company has put together quite the earnings surprise track record as it was the 10th consecutive earnings surprise.

Earnings were $1.11 compared to the Zacks Consensus of $1.07 per share. It made just 87 cents a year ago.

The increase was due to higher volume, favorable mix, acquisitions, surcharges and pricing which easily offset the increased raw material and administrative costs.

Sales jumped 18% to $1.3 billion due to growth across most of the company's end markets. Acquisitions were about 33% of the growth in the quarter.

For the year, sales rose to a record $5.2 billion.

Growth to Continue in 2012

In January, the company was still bullish on 2012.

Sales were expected to grow 5% to 8% with Process Industries and Aerospace and Defense seeing the largest sales gains of 8% to 13% and 10% to 15%, respectively.

2012 earnings are projected in the range of $4.90 to $5.20 per share.

The 2012 Zacks Consensus Estimate Rises

The analysts are feeling even more optimistic than the company about 2012.

The 2012 Zacks Consensus Estimate has risen to $5.30 from $5.20 in the last 90 days.

That is still earnings growth of 15.4% even though the company made a record $4.59 in 2011.

Dividend Raised 15%

On Feb 10, Timken raised its dividend 15% over the prior quarter. The new dividend was payable on Mar 2, 2012.

The dividend yield is now 1.8%.

Timken has an amazing track record of rewarding shareholders. It has paid 359 consecutive dividends. That's 89 years!

The Board also approved a new stock buyback program for up to 10 million shares. This replaces the existing program which had 2 million shares remaining but was set to expire at the end of 2012.

The new plan is in place through Dec 31, 2015.

Shares Near 5-Year Highs

Shares are again pressuring the 5-year high.

But there is still plenty of value.

In addition to a P/E under 10, Timken has a price-to-book ratio of 2.4. A P/B ratio under 3.0 usually indicates value.

The company also has a stellar price-to-sales ratio of 0.96. A P/S ratio under 1.00 can mean a company is undervalued.

If you're looking for even further solid fundamentals, Timken has a 1-year return on equity (ROE) of 21.3%. The S&P 500, by comparison, has an average ROE of just 13.4%.

Timken is operating on all cylinders. It's a value stock with growth and it's rewarding shareholders by both raising its dividend and buying back shares.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec.