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Barnes (B) Beats Q1 Earnings Estimates, Raises Projections

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Barnes Group Inc. (B - Free Report) delivered impressive results for the first quarter of 2021. Its earnings surpassed estimates by 22.58%, whereas sales exceeded the same by 11.18%. Notably, the company’s shares gained 3.27% yesterday, ending the trading session at $51.55.

Its adjusted earnings in the reported quarter were 38 cents per share. It surpassed the Zacks Consensus Estimate of 31 cents. However, the bottom line decreased 46.5% from the year-ago quarter figure of 71 cents due to lower sales generation and weakness in margins.

Top-Line Results

In the reported quarter, Barnes’ net sales decreased 8.8% year over year to $301.6 million. Organic sales in the first quarter declined 10% year over year due to the adverse impacts of the pandemic on aerospace end markets. Divestitures too lowered sales by 2%, while movements in foreign currencies had a positive impact of 3%.

It is worth noting here that first-quarter sales rose 4% from fourth-quarter 2020.

The company’s revenues surpassed the Zacks Consensus Estimate of $271 million.

Barnes reports revenues under two heads — Industrial and Aerospace. A brief snapshot of the segmental sales is provided below:

Revenues generated from Industrial amounted to $220 million, increasing 10.5% year over year. The segment gained from strengthening end-market businesses. Organic sales were up 8% year over year and movements in foreign currencies had a positive impact of 5%, partially offset by an adverse divestiture impact of 3%.

Aerospace’s sales were $81.6 million in the first quarter, down 37.9% from the year-ago quarter. The reported quarter’s performance was adversely impacted by weakness in aerospace end markets due to the pandemic. Aftermarket sales were down 48%, while that of original equipment manufacturing declined 32%.

Margin Profile

In the reported quarter, Barnes’ cost of sales decreased 6.5% year over year to $194.7 million. Notably, cost of sales represented 64.6% of net sales versus 63% in the year-ago quarter. Selling and administrative expenses increased 2% year over year to $74.6 million, and represented 24.7% of net sales.

Adjusted operating income in the reported quarter decreased 37.5% year over year to $32.4 million, whereas margin fell 490 basis points to 10.7%. Interest expenses totaled $3.9 million in the reported quarter, down 8.8% year over year.

Balance Sheet & Cash Flow

Exiting the first quarter, Barnes’ cash and cash equivalents were $84.9 million, up 7.3% from $79.2 million recorded in the last reported quarter. Long-term debt was $664 million, reflecting a 5.1% decline from $699.9 million in the last reported quarter.

In the reported quarter, the company repaid long-term debt of $30.9 million. Also, it received $15 million as proceeds from the issuance of long-term debts. Liquidity available in the quarter included cash of $85 million and credit under revolving facilities of $441 million.

In the quarter under review, the company generated net cash of $35.6 million from operating activities, down 24.5% from the year-ago quarter. Capital expenditure totaled $7.9 million, decreasing 34.1% year over year. Free cash flow was $27.8 million versus $35.3 million in the year-ago quarter.

In the first quarter, Barnes paid out dividends amounting to $8.1 million, representing a 0.4% decrease from the prior-year quarter’s disbursement. No shares were repurchased in the quarter.

Outlook

For 2021, Barnes anticipates earnings of $1.78-$1.98 per share, above the previously stated $1.65-$1.90. The revised projection suggests year-over-year growth of 9-21%. Movements in foreign currencies are expected to boost sales by 2%. Divestiture impact is expected to be adverse 1%.

Organic sales for the year are expected to rise 10-12% (on a year-over-year basis) versus 6-8% mentioned earlier. Operating margin is predicted to be 13% versus the previously stated 12-14%.

The company anticipates capital expenditure of $50 million, down from the previously mentioned $55 million. Cash conversion is expected to exceed 100% of net income. Effective tax rate for 2021 is expected to be 30%.

Barnes Group, Inc. Price, Consensus and EPS Surprise

 

Barnes Group, Inc. Price, Consensus and EPS Surprise

Barnes Group, Inc. price-consensus-eps-surprise-chart | Barnes Group, Inc. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $2.6 billion, Barnes currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industry are Applied Industrial Technologies, Inc. (AIT - Free Report) , Dover Corporation (DOV - Free Report) and Graco Inc. (GGG - Free Report) . All the companies presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, earnings estimates for these companies improved for the current year. Further, earnings surprise for the last reported quarter was 35.64% for Applied Industrial, 23.13% for Dover and 16.00% for Graco.

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