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Reasons Why You Should Avoid Betting on Barnes (B) Stock Now
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Barnes Group Inc. (B - Free Report) has failed to impress investors with its recent operational performance on account of productivity challenges in some of its facilities across North America and Asia due to a significant amount of new employee hiring, rising operating costs and increasing interest expenses. These factors are likely to impede Barnes’ earnings in the quarters ahead.
Let’s discuss the factors, which are likely to continue taking a toll on this Zacks Rank #5 (Strong Sell) company.
Business Weakness: Barnes’ motion control solutions business within the Industrial segment has been facing challenges due to the ongoing United Auto Workers strike. Also, shipment delays and lagging orders have been worrisome for the segment. Higher-than-expected transformation costs, a slowdown in the U.S. economy, geopolitical instability and labor-productivity challenges are likely to impact Barnes’ performance in the near term.
Also, in the third quarter of 2023, the Aerospace segment’s adjusted operating margin declined 380 basis points year over year due to long-term intangible amortization from the MB Aerospace acquisition and lower productivity.
Steep Costs: Barnes’ cost of sales in the first nine months of 2023 increased 12.1% year over year. High raw material costs are pushing up the cost of sales. Selling and administrative expenses also rose 24.3% in the same period. Escalating costs, if unchecked, can be detrimental to Barnes’ margins and profitability.
Rising Interest Expenses: Increasing interest expenses are worrisome for the company. Barnes’ interest expense was $22.8 million in the third quarter compared with $3.4 million in the year-ago period. The increase was due to the MB Aerospace acquisition. It is worth noting that the high-interest expense drove the majority of the year-over-year decline in adjusted earnings per share (down 157.9% in the third quarter).
Southbound Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for B’s 2023 earnings has been revised 19.1% downward.
Price Performance: Shares of the company have declined 34.6% in the past year against the industry’s 4.5% increase.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Barnes currently carries a Zacks Rank #5 (Sell). Some better-ranked companies from the Industrial Products sector are discussed below:
GGG’s earnings surprise in the last four quarters was 7.2%, on average. In the past 60 days, estimates for Graco’s 2023 earnings have increased 1.7%. The stock has gained 13.4% in the past year.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank of 2 and a trailing four-quarter earnings surprise of 13.9%, on average.
AIT’s earnings estimates have increased 3.7% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 29.6% in the past year.
A. O. Smith Corporation (AOS - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 14%, on average.
In the past 60 days, estimates for A. O. Smith’s earnings have increased 4.5% for 2023. The stock has soared 27.1% in the past year.
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Reasons Why You Should Avoid Betting on Barnes (B) Stock Now
Barnes Group Inc. (B - Free Report) has failed to impress investors with its recent operational performance on account of productivity challenges in some of its facilities across North America and Asia due to a significant amount of new employee hiring, rising operating costs and increasing interest expenses. These factors are likely to impede Barnes’ earnings in the quarters ahead.
Let’s discuss the factors, which are likely to continue taking a toll on this Zacks Rank #5 (Strong Sell) company.
Business Weakness: Barnes’ motion control solutions business within the Industrial segment has been facing challenges due to the ongoing United Auto Workers strike. Also, shipment delays and lagging orders have been worrisome for the segment. Higher-than-expected transformation costs, a slowdown in the U.S. economy, geopolitical instability and labor-productivity challenges are likely to impact Barnes’ performance in the near term.
Also, in the third quarter of 2023, the Aerospace segment’s adjusted operating margin declined 380 basis points year over year due to long-term intangible amortization from the MB Aerospace acquisition and lower productivity.
Steep Costs: Barnes’ cost of sales in the first nine months of 2023 increased 12.1% year over year. High raw material costs are pushing up the cost of sales. Selling and administrative expenses also rose 24.3% in the same period. Escalating costs, if unchecked, can be detrimental to Barnes’ margins and profitability.
Rising Interest Expenses: Increasing interest expenses are worrisome for the company. Barnes’ interest expense was $22.8 million in the third quarter compared with $3.4 million in the year-ago period. The increase was due to the MB Aerospace acquisition. It is worth noting that the high-interest expense drove the majority of the year-over-year decline in adjusted earnings per share (down 157.9% in the third quarter).
Southbound Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for B’s 2023 earnings has been revised 19.1% downward.
Price Performance: Shares of the company have declined 34.6% in the past year against the industry’s 4.5% increase.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Barnes currently carries a Zacks Rank #5 (Sell). Some better-ranked companies from the Industrial Products sector are discussed below:
Graco Inc. (GGG - Free Report) presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
GGG’s earnings surprise in the last four quarters was 7.2%, on average. In the past 60 days, estimates for Graco’s 2023 earnings have increased 1.7%. The stock has gained 13.4% in the past year.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank of 2 and a trailing four-quarter earnings surprise of 13.9%, on average.
AIT’s earnings estimates have increased 3.7% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 29.6% in the past year.
A. O. Smith Corporation (AOS - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 14%, on average.
In the past 60 days, estimates for A. O. Smith’s earnings have increased 4.5% for 2023. The stock has soared 27.1% in the past year.