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Timken (TKR) Eyes Strong Growth in Automatic Lubrication Systems

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The Timken Company (TKR - Free Report) recently announced that its automatic lubrication systems revenues have more than doubled in the past five years on organic growth and strategic buyouts. The company is well poised to register record revenues for the automatic lubrication systems business this year, driven by continued focus on expanding its industrial offerings and global presence.

Timken is the world’s second largest automatic lubrication systems producer for industrial applications with its thriving Groeneveld and BEKA brands. Later this year, these brands will start assembling the company’s new multi-line pump at its recently-expanded state-of-the art North America facility based in Dayton, OH. Meanwhile, the business is growing its manufacturing presence in China in response to the rising automatic lubrication demand in the country. Timken’s production expansion in North America and China will open up growth scope for its portfolio.

The automatic lubrication system is more sustainable than manual practices and helps save money through efficient use of materials and longer-lasting equipment. A properly installed automatic system can reduce grease waste by up to 50%. Safety is another key criterion for automatic lubrication system. Customers working in hazardous environments, like ports, mines and quarries, are preferring Groeneveld and BEKA automatic systems in order to reduce risk and prevent accidents. Timken expects customers’ global trend toward adopting automatic lubrication systems to gather steam, while focus on innovative product development initiatives will enable it to generate double-digit compound annual revenue growth rate (CAGR) through 2025.

In 2013, the company stepped in the automatic lubrication market through the Interlube acquisition. In 2017, Timken acquired Groeneveld and extended its portfolio and global reach in this market. With the BEKA buyout in 2019, the company has strengthened its global leadership in the automatic lubrication systems market sector. Apart from these, the company bought Diamond Chain which boosted Timken’s leadership in high-performance roller chains for industrial markets. Last year, it purchased all assets of Aurora Bearing Company to expand its offerings in the engineered bearings market. These buyouts support Timken’s focus on growing its foothold in the engineered bearings space, and diversifying its portfolio into adjacent products, markets and geographies.

Timken expects to register 18% revenue growth in the current year, higher than its previous estimate of 12% growth. This upbeat view is driven by improving markets and higher organic revenues across Timken’s Mobile Industries and Process Industries segments, favorable impact of foreign currency-exchange rates and the benefit of acquisitions. It anticipates adjusted earnings per share between $5.15 and $5.45 for 2021. The mid-point of the guidance reflects year-over-year growth of 30%.

Timken is taking actions to enhance liquidity, reduce costs and generate strong cash flow. The company began expanding and accelerating certain structural cost-reduction initiatives to align its costs with the near-term demand expectations and improve long-term profitability. These actions will help sustain margins amid lower volumes.

Price Performance

Timken’s shares have appreciated 76.6% over the past year, outperforming the industry’s growth of 60.2%.

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Zacks Rank & Other Stocks to Consider

Timken currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few other top-ranked stocks in the Industrial Products sector are Greif, Inc. (GEF - Free Report) , Lindsay Corporation (LNN - Free Report) and Pentair plc (PNR - Free Report) . All of these stocks sport a Zacks Rank #1, at present.

Greif has an anticipated earnings growth rate of 47.2% for fiscal 2021. The company’s shares have gained around 29.3%, year to date.

Lindsay has an estimated earnings growth rate of 1% for the ongoing fiscal year. Year to date, the company’s shares have rallied 29.1%.

Pentair has a projected earnings growth rate of 26% for the current year. The stock has appreciated around 29%, so far this year.


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