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John Bean (JBT) Bets on Strategic Initiatives Amid Weak Demand

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On Nov 17, 2020, we issued an updated research report on John Bean Technologies Corporation (JBT - Free Report) . The company is poised to gain on strategic acquisition program and focus on developing innovative products and services. In the FoodTech segment, the ongoing strong demand for packaged food in retail triggered by the pandemic will help offset the impact of weak demand for food service due to reduced restaurant, travel and school activity. The AeroTech segment is likely to bear the brunt of a decline in global passenger air travel.

Coronavirus to Impact Q4 Results

John Bean reported adjusted earnings of 83 cents per share in third-quarter 2020, which declined 35% from the prior-year quarter. This highlights the impact of the COVID-19 pandemic as reductions in global passenger air travel and global foodservice production weakened demand for the company’s products and services.

The food industry has experienced a surge in retail demand driven by packaged food purchases on account of pandemic induced global shelter-in-place and social distancing trends. This bodes well for the company’s FoodTech segment. However, persistent decline in demand for food service due to reduced restaurant, travel and school activity will somewhat negate these gains. The company expects an increase of 3-5% in the segment’s fourth-quarter revenues on a sequential basis.

A large portion of the AeroTech segment is dependent on the passenger airline industry, which has been severely disrupted by the coronavirus crisis. This is expected to persist till the situation improves. Cargo customers have largely delayed airfreight capital investments to 2021. Further, the segment is witnessing reduced aftermarket demand due to lower equipment utilization by customers. The AeroTech segment’s revenues are expected to decline 7-8% sequentially in the fourth quarter.

John Bean projects adjusted earnings per share between 80 cents and 90 cents for fourth-quarter 2020. The mid-point of the guided range projects a slump of 43% from earnings of $1.50 per share in fourth-quarter 2019.

Cost Cuts, Restructuring Actions to Yield Savings

John Bean is focusing on lowering costs in light of the uncertain market conditions through hiring freeze, halting pay raises, cutting down discretionary spending and other means. Further, its ongoing restructuring plan will help improve effectiveness and productivity in all business units. The company anticipates achieving total program savings target of $55 million by next year. In third-quarter 2020, John Bean implemented a restructuring plan for manufacturing capacity rationalization affecting both FoodTech and AeroTech segments. These restructuring actions are expected to generate $0.5 million in cost savings in fourth-quarter 2020 and incremental cost savings of $5 million during 2021.

Poised Well on Elevate Plan

John Bean’s Elevate plan is likely to drive continued growth and margin expansion. Per the plan, the company is focusing on accelerating development of innovative products and services to provide customers with solutions, which will enhance their yield and productivity.

The company is capitalizing on extensive installed base to increase recurring revenues (which accounts for around 40% of its revenues) from aftermarket parts and services, equipment leases, consumables and airport services. This portion of the business has been witnessing a CAGR of 9% over the past three years. In fact, it has room for further growth and will contribute to margins.

Solid Acquisition Strategy

John Bean has a strategic acquisition program focused on companies that add complementary products, which enable it to offer more comprehensive solutions to customers. In sync with this, it completed the acquisitions of Proseal UK Limited, a leading provider of tray sealing technology, and Prime Equipment Group, Inc., a manufacturer of turnkey primary and water re-use solutions to the poultry industry. The buyout of Prime advances its goal of becoming the preferred provider of full-line solutions for poultry customers. The acquisitions are expected to add revenues of $140-150 million in 2020.

Price Performance

John Bean’s shares have fallen 6.5% over the past year against the industry’s rally of 23.0%.

Zacks Rank & Stocks to Consider

John Bean currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include AGCO Corporation (AGCO - Free Report) , Crown Holdings, Inc. (CCK - Free Report) and iRobot Corporation (IRBT - 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.

AGCO has an estimated earnings growth rate of 15.4% for the ongoing year. The company’s shares have gained 21% year to date.

Crown Holdings has a projected earnings growth rate of 11.7% for 2020. The company’s shares have appreciated 32% so far this year.

iRobot has an expected earnings growth rate of 18.9% for the current year. The stock has surged 54% year to date.

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