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Here's Why Timken (TKR) Stock is Worth Betting On Right Now
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The Timken Company (TKR - Free Report) is poised to benefit from acquisition strategy, focus on cost-control actions and expansion in the renewable energy space.
The company currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy), or 2, make solid investment choices. You can see the complete list of today’s Zacks #1 Rank stocks here.
The stock has gained 77% over the past six months, outperforming the industry’s growth of 44.8%.
Remarkably, Timken has a number of other aspects that make it a solid investment choice.
Earnings & Sales Top Estimates in Q3
The company reported third-quarter 2020 adjusted earnings per share of $1.13, handily beating the Zacks Consensus Estimate of 91 cents. Revenues of $895 million also surpassed the Zacks Consensus Estimate of $811 million.
Positive Estimate Revision Activity: The Zacks Consensus Estimate for the company’s current-year earnings per share moved 12.4% north over the past 30 days and is currently pegged at $4.16.
Earnings Growth Prospects: Timken has recorded an earnings growth rate of 11.9% over the past five years, ahead of the industry’s 2.4%. The momentum is likely to continue as evident from its estimated long-term earnings growth rate of 4.5%.
Earnings Surprise History: The company has a trailing four-quarter average earnings surprise of 56.4%.
Driving Factors
Acquisition to Aid Growth
Timken continues to pursue strategic acquisitions in a bid to broaden its portfolio and capabilities across diverse markets, with focus on bearings, adjacent power transmission products and related services. In 2018, the company acquired Rollon, Cone Drive and ABC Bearings.
In 2019, Timken completed the buyouts of BEKA Lubrication and the Diamond Chain Company. The acquisition of BEKA Lubrication strengthened the company’s global leadership in the automatic lubrication systems market sector. The Diamond Chain buyout has reinforced Timken's leadership in high-performance roller chains for industrial markets. These acquisitions have fortified the company's global presence in growing markets, particularly China and Europe.
Strong End-Market Demand
The company is witnessing solid demand across most of its markets, including the Wind and Solar sectors. Timken’s products are essential for the efficient and reliable operations of industrial equipment globally. Demand for the company’s products will remain robust in the years to come. Its diversity in terms of end market, customer and geography, product innovation, and engineering expertise provides a competitive edge.
The global demand for renewable energy is expected to witness a CAGR of around 8% over the next 10 years. The share of electricity generation from renewable is expected to more than double by 2030. Thus, the company is focused on targeted investments in this sector to capitalize on this trend and making it a bigger part of its portfolio in the future.
Cost Savings to Boost Margins
Timken is taking actions to enhance liquidity, reduce costs and generate strong cash flow. The company has accelerated and expanded its structural cost-reduction initiatives and expects to generate approximately $55-$60 million of total year-over-year savings in the remaining part of 2020. These actions will help sustain margins.
Other Stocks to Consider
Some other top-ranked stocks in the Industrial Products sector include iRobot Corporation (IRBT - Free Report) , Crown Holdings, Inc. (CCK - Free Report) and SiteOne Landscape Supply, Inc. (SITE - Free Report) . While iRobot flaunts a Zacks Rank #1, Crown Holdings and SiteOne Landscape carry a Zacks Rank of 2, at present.
iRobot has an estimated earnings growth rate of 18.8% for the ongoing year. Shares of the company have gained 19.2% in the past six months.
Crown Holdings has a projected earnings growth rate of 11.7% for fiscal 2020. Over the past six months, the company’s shares have appreciated 56.2%.
SiteOne Landscape has an expected earnings growth rate of 28.6% for 2020. The stock has climbed 51.7% in six months’ time.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Here's Why Timken (TKR) Stock is Worth Betting On Right Now
The Timken Company (TKR - Free Report) is poised to benefit from acquisition strategy, focus on cost-control actions and expansion in the renewable energy space.
The company currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy), or 2, make solid investment choices. You can see the complete list of today’s Zacks #1 Rank stocks here.
The stock has gained 77% over the past six months, outperforming the industry’s growth of 44.8%.
Remarkably, Timken has a number of other aspects that make it a solid investment choice.
Earnings & Sales Top Estimates in Q3
The company reported third-quarter 2020 adjusted earnings per share of $1.13, handily beating the Zacks Consensus Estimate of 91 cents. Revenues of $895 million also surpassed the Zacks Consensus Estimate of $811 million.
Positive Estimate Revision Activity: The Zacks Consensus Estimate for the company’s current-year earnings per share moved 12.4% north over the past 30 days and is currently pegged at $4.16.
Earnings Growth Prospects: Timken has recorded an earnings growth rate of 11.9% over the past five years, ahead of the industry’s 2.4%. The momentum is likely to continue as evident from its estimated long-term earnings growth rate of 4.5%.
Earnings Surprise History: The company has a trailing four-quarter average earnings surprise of 56.4%.
Driving Factors
Acquisition to Aid Growth
Timken continues to pursue strategic acquisitions in a bid to broaden its portfolio and capabilities across diverse markets, with focus on bearings, adjacent power transmission products and related services. In 2018, the company acquired Rollon, Cone Drive and ABC Bearings.
In 2019, Timken completed the buyouts of BEKA Lubrication and the Diamond Chain Company. The acquisition of BEKA Lubrication strengthened the company’s global leadership in the automatic lubrication systems market sector. The Diamond Chain buyout has reinforced Timken's leadership in high-performance roller chains for industrial markets. These acquisitions have fortified the company's global presence in growing markets, particularly China and Europe.
Strong End-Market Demand
The company is witnessing solid demand across most of its markets, including the Wind and Solar sectors. Timken’s products are essential for the efficient and reliable operations of industrial equipment globally. Demand for the company’s products will remain robust in the years to come. Its diversity in terms of end market, customer and geography, product innovation, and engineering expertise provides a competitive edge.
The global demand for renewable energy is expected to witness a CAGR of around 8% over the next 10 years. The share of electricity generation from renewable is expected to more than double by 2030. Thus, the company is focused on targeted investments in this sector to capitalize on this trend and making it a bigger part of its portfolio in the future.
Cost Savings to Boost Margins
Timken is taking actions to enhance liquidity, reduce costs and generate strong cash flow. The company has accelerated and expanded its structural cost-reduction initiatives and expects to generate approximately $55-$60 million of total year-over-year savings in the remaining part of 2020. These actions will help sustain margins.
Other Stocks to Consider
Some other top-ranked stocks in the Industrial Products sector include iRobot Corporation (IRBT - Free Report) , Crown Holdings, Inc. (CCK - Free Report) and SiteOne Landscape Supply, Inc. (SITE - Free Report) . While iRobot flaunts a Zacks Rank #1, Crown Holdings and SiteOne Landscape carry a Zacks Rank of 2, at present.
iRobot has an estimated earnings growth rate of 18.8% for the ongoing year. Shares of the company have gained 19.2% in the past six months.
Crown Holdings has a projected earnings growth rate of 11.7% for fiscal 2020. Over the past six months, the company’s shares have appreciated 56.2%.
SiteOne Landscape has an expected earnings growth rate of 28.6% for 2020. The stock has climbed 51.7% in six months’ time.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>