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JBT (JBT) Up 8.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for John Bean (JBT - Free Report) . Shares have added about 8.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is JBT due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

John Bean Q2 Earnings and Revenues Beat Estimates

John Bean reported adjusted earnings of $1.09 per share in second-quarter 2020, surpassing the Zacks Consensus Estimate of 73 cents by a margin of 49%. However, the bottom line declined 23% from the prior-year quarter.

On a reported basis, the company’s earnings per share was $1.01 compared with the prior-year quarter’s $1.06.

Revenues of $412 million in the reported quarter beat the Zacks Consensus Estimate of $399 million. Further, the top line declined 17% from the prior-year quarter figure of $493 million. A 5% contribution from acquisitions was offset by a decline of 20% in organic sales and an unfavorable impact of foreign exchange of 2%.

In the reported quarter, the company’s total orders went down 26% to $344.6 million from the prior-year quarter. Orders in the JBT FoodTech segment totaled $262.7 million, reflecting a year-over-year decline of 15%. In the JBT AeroTech segment, orders declined to $81.9 million from $159.3 million reported in the prior-year quarter.

Backlog in the FoodTech segment declined 14% year over year to $360 million. The AeroTech segment’s backlog came in at $283 million in the reported quarter, down 19% from the prior-year quarter. Total backlog of $643.1 million as of the second quarter end was down 16% year over year.

Cost and Margins

Cost of sales decreased 17% year over year to $281 million in the second quarter. Gross profit declined 16% year over year to $130 million. Gross margin came in at 31.6% compared with the year-earlier quarter’s 31.4%.

Selling, general and administrative expenses were down 22% year over year to $81 million. Adjusted operating profit declined 18% year over year to $50.7 million. Adjusted operating margin was 12.3% compared with prior-year quarter’s 12.6%.  In the reported quarter, adjusted EBITDA came in at $68.4 million, down 12% year over year.

Segment Performance

JBT FoodTech: Net sales fell 12% year over year to $303 million. Adjusted operating profit amounted to $49 million, down 12% from the prior-year quarter.

JBT AeroTech: Net sales were $109, reflecting a decline of 28% from the prior-year quarter. The segment’s adjusted operating profit slumped 44% year over year to $10.3 million.

Financial Performance

John Bean reported cash and cash equivalents of $58 million at the end of second-quarter 2020, up from $39.5 million at the end of fiscal 2019. The company generated around $101 million of cash from operating activities during the first half of 2020 compared with the $13 million reported in the prior-year comparable period. At the end of second-quarter 2020, long-term debt was $648 million, down from $698 million as of Dec 31, 2019.

Guidance

Despite the ongoing uncertainty related to the coronavirus pandemic, the company expects orders to improve on a sequential basis in both the FoodTech and AeroTech segments in third-quarter 2020. However, this increase in levels of customer engagement is expected to result in higher costs in the quarter. John Bean anticipates a sequential decline in revenues and operating profit in third-quarter 2020.

For third-quarter 2020, John Bean anticipates a sequential decline of 10-12% in revenues for the FoodTech segment. Margins are expected to be flat compared with first-quarter 2020.

The AeroTech segment’s revenue is expected to increase 6-8% in the third quarter owing to typical seasonality. Margins are expected to improve 75-100 basis points sequentially.

Further, in third-quarter 2020, John Bean expects to incur restructuring and other charges of $8-$9 million related to manufacturing capacity rationalizations at both of the segments. This action is expected to generate permanent run rate benefits of $6-$7 million by the end of 2021. It expects to incur a $1.5 million discrete tax charge in connection with new U.K. tax laws.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, JBT has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, JBT has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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