Back to top

Image: Bigstock

Timken (TKR) Q3 Earnings and Revenues Surpass Estimates

Read MoreHide Full Article

The Timken Company (TKR - Free Report) reported third-quarter 2020 adjusted earnings per share of $1.13, which beat the Zacks Consensus Estimate of 91 cents by a margin of 24%. However, the bottom line declined 1% from the prior-year quarter as gains from lower operating expenses reflecting the impact of cost reduction initiatives, favorable manufacturing performance and a lower tax rate were offset by lower volumes thanks to the COVID-19 pandemic and price/mix and currency.

On a reported basis, the company delivered earnings per share of $1.16 in the reported quarter compared with 84 cents in the prior-year quarter.

Total revenues in the quarter were $895 million, down 2% from the year-ago quarter on account of lower demand in most end-markets due to the COVID-19. However, this was partially offset by favorable impact of acquisitions and robust growth in renewable energy. However, the top line surpassed the Zacks Consensus Estimate of $811 million.

Timken Company The Price, Consensus and EPS Surprise 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 1% to $631 million from the prior-year quarter. Gross profit declined 5% year over year to $264 million. Gross margin was 29.5% compared with 30.4% in the year-ago quarter.

Selling, general and administrative expenses were down 10% to $133 million from the prior-year quarter. Adjusted EBITDA declined 47% year over year to $174 million. Adjusted EBITDA margin in the quarter was 19.4% compared with 19.8% in the prior-year quarter.

Segmental Performance

The Mobile Industries segment revenues declined 6% to $429 million from $455 million in the year-ago quarter. This downside was primarily due to lower shipments across most end-markets, partly offset by contributions from acquisitions. The segment’s adjusted EBITDA slipped 5% year over year to $68 million.

The Process Industries segment revenues rose 2% year over year to $466 million in the quarter, driven primarily by strong growth in renewable energy, positive pricing and the benefit of acquisitions, partially offset by lower revenues across most other sectors. The segment’s adjusted EBITDA fell 3% year over year to $115 million.

Financial Position

Timken generated free cash flow of $124 million in third-quarter 2020 compared with $101 million in the prior-year quarter. Cash flow from operations was around $154 million in the reported quarter compared with $145 million in the previous-year quarter.

As of the third-quarter end, the company had $313 million of cash on hand and more than $600 million of availability under committed credit facilities. The company’s net debt to capital ratio stood at 0.38 as of Sep 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 costs with near-term demand expectations and also improve margins of the company longer-term. Cost reduction actions are expected to generate year-over-year savings of approximately $55 to $60 million in the second half of 2020, compared with the previous guidance of $50 million to $60 million.

Share Price Performance

Year-to-date, shares of Timken have gained 3.2% against the industry’s decline of 14.4%.

Zacks Rank & Stocks to Consider

Timken currently sports a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are Crown Holdings, Inc. (CCK - Free Report) , iRobot Corporation (IRBT - Free Report) and Worthington Industries, Inc. (WOR - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Crown Holdings has a projected earnings growth rate of 11.7% for fiscal 2020. Year to date, the company’s shares have appreciated 20%.

iRobot has an estimated earnings growth rate of 18.8% for the ongoing year. The company’s shares have rallied 61% so far this year.

Worthington has an expected earnings growth rate of 19.2% for 2020. The stock has climbed 17% year to date.

Have You Seen Zacks’ 2020 Election Stock Report?

The upcoming election could be a massive buying opportunity for savvy investors. Trillions of dollars will shift into new market sectors after the election. The question is, which sectors will soar for each candidate? Zacks has put together a new special report to help readers like you target big profits.

The 2020 Election Stock Report reveals specific stocks you’ll want to own immediately after the results are announced – 6 if Trump wins, 6 if Biden wins. Past election reports have led investors to gains of +71%, +83%, even +185% in the following months. This year’s picks could be even more lucrative.

Check out Zacks’ 2020 Election Stock Report >>