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Timken (TKR) Q2 Earnings and Revenues Surpass Estimates
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The Timken Company (TKR - Free Report) reported second-quarter 2020 adjusted earnings per share of $1.02, which beat the Zacks Consensus Estimate of 33 cents by a wide margin. However, the bottom line declined 20% from the prior-year quarter due to lower volumes and related manufacturing utilization, and impact of unfavorable currency. However, lower selling, general and administrative expenses, favorable price/mix, and lower material and logistics costs somewhat mitigated the impact. Timken had implemented cost reduction actions in the quarter under review, which led to lower operating expenses.
On a reported basis, Timken delivered earnings per share of 82 cents in the reported quarter compared with $1.20 in the prior-year quarter.
Total revenues in the quarter were $804 million, down 20% from the year-ago quarter on account of lower demand due to the COVIS-19 situation and unfavorable currency impact, partially offset by the favorable impact of acquisitions. The top line, however, surpassed the Zacks Consensus Estimate of $705 million.
Timken Company The Price, Consensus and EPS Surprise
Cost of sales was down 17% to $573 million from the prior-year quarter. Gross profit slumped 25% year over year to $230 million. Gross margin was 28.7% compared with 30.6% in the year-ago quarter.
Selling, general and administrative expenses went down 30% to $112 million from the prior-year quarter. Adjusted EBITDA declined 17% year over year to $164.2 million. Adjusted EBITDA margin in the quarter was 20.4% compared with 19.7% in the prior-year quarter.
Segmental Performance
The Mobile Industries segment revenues declined to $343 million from $494 million in the year-ago quarter. This downside was primarily due to lower shipments across the board, partly offset by the benefit of acquisitions. The segment’s adjusted EBITDA plunged 47% year over year to $42 million.
The Process Industries segment revenues decreased 9% year over year to $461 million in the quarter, due to lower revenues across all sectors and unfavorable currency-translation impact. The segment’s adjusted EBITDA dipped 1% year over year to $129 million.
Financial Position
Timken generated free cash flow of $223 million in second-quarter 2020 compared with $135 million in the prior-year quarter. Cash flow from operations was around $247 million in the reported quarter compared with $158 million in the previous-year quarter.
As of the second quarter end, the company had $416 million of cash on hand and over $400 million of availability under committed credit facilities. The company’s net debt to capital ratio stood at 0.41 as of Jun 30, 2020.
Considering the ongoing uncertainty surrounding COVID-19, the company has not provided sales and earnings guidance for 2020.
Timken has accelerated and expanded structural cost reduction initiatives to align both its costs with near-term demand expectations and improve margins of the company longer-term. Cost reduction actions are expected to generate year-over-year savings of approximately $50 to $60 million in the second half of 2020.
Share Price Performance
Over the past three months, shares of Timken have gained 35.2% compared with the industry’s rally of 26.2%.
Some other top-ranked stocks in the Industrial Products sector include Silgan Holdings, Inc. (SLGN - Free Report) , IIVI Incorporated and Energous Corporation (WATT - Free Report) . While Silgan and IIVI sport a Zacks Rank #1, Energous carries a Zacks Rank of 2 (Buy), at present.
Silgan has a projected earnings growth rate of 31.5% for the current year. The company’s shares have gained 13% in the past three months.
IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 51% in three months’ time.
Energous has an expected earnings growth rate of 44% for 2020. The stock has surged 60% over the past three months.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Timken (TKR) Q2 Earnings and Revenues Surpass Estimates
The Timken Company (TKR - Free Report) reported second-quarter 2020 adjusted earnings per share of $1.02, which beat the Zacks Consensus Estimate of 33 cents by a wide margin. However, the bottom line declined 20% from the prior-year quarter due to lower volumes and related manufacturing utilization, and impact of unfavorable currency. However, lower selling, general and administrative expenses, favorable price/mix, and lower material and logistics costs somewhat mitigated the impact. Timken had implemented cost reduction actions in the quarter under review, which led to lower operating expenses.
On a reported basis, Timken delivered earnings per share of 82 cents in the reported quarter compared with $1.20 in the prior-year quarter.
Total revenues in the quarter were $804 million, down 20% from the year-ago quarter on account of lower demand due to the COVIS-19 situation and unfavorable currency impact, partially offset by the favorable impact of acquisitions. The top line, however, surpassed the Zacks Consensus Estimate of $705 million.
Timken Company The Price, Consensus and EPS Surprise
Timken Company The price-consensus-eps-surprise-chart | Timken Company The Quote
Costs and Margins
Cost of sales was down 17% to $573 million from the prior-year quarter. Gross profit slumped 25% year over year to $230 million. Gross margin was 28.7% compared with 30.6% in the year-ago quarter.
Selling, general and administrative expenses went down 30% to $112 million from the prior-year quarter. Adjusted EBITDA declined 17% year over year to $164.2 million. Adjusted EBITDA margin in the quarter was 20.4% compared with 19.7% in the prior-year quarter.
Segmental Performance
The Mobile Industries segment revenues declined to $343 million from $494 million in the year-ago quarter. This downside was primarily due to lower shipments across the board, partly offset by the benefit of acquisitions. The segment’s adjusted EBITDA plunged 47% year over year to $42 million.
The Process Industries segment revenues decreased 9% year over year to $461 million in the quarter, due to lower revenues across all sectors and unfavorable currency-translation impact. The segment’s adjusted EBITDA dipped 1% year over year to $129 million.
Financial Position
Timken generated free cash flow of $223 million in second-quarter 2020 compared with $135 million in the prior-year quarter. Cash flow from operations was around $247 million in the reported quarter compared with $158 million in the previous-year quarter.
As of the second quarter end, the company had $416 million of cash on hand and over $400 million of availability under committed credit facilities. The company’s net debt to capital ratio stood at 0.41 as of Jun 30, 2020.
Considering the ongoing uncertainty surrounding COVID-19, the company has not provided sales and earnings guidance for 2020.
Timken has accelerated and expanded structural cost reduction initiatives to align both its costs with near-term demand expectations and improve margins of the company longer-term. Cost reduction actions are expected to generate year-over-year savings of approximately $50 to $60 million in the second half of 2020.
Share Price Performance
Over the past three months, shares of Timken have gained 35.2% compared with the industry’s rally of 26.2%.
Zacks Rank & Other Stocks to Consider
Timken currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Some other top-ranked stocks in the Industrial Products sector include Silgan Holdings, Inc. (SLGN - Free Report) , IIVI Incorporated and Energous Corporation (WATT - Free Report) . While Silgan and IIVI sport a Zacks Rank #1, Energous carries a Zacks Rank of 2 (Buy), at present.
Silgan has a projected earnings growth rate of 31.5% for the current year. The company’s shares have gained 13% in the past three months.
IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 51% in three months’ time.
Energous has an expected earnings growth rate of 44% for 2020. The stock has surged 60% over the past three months.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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