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Timken (TKR) Expects Dull H2 Results on Supply Chain Issues
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The Timken Company (TKR - Free Report) recently announced that its sales and earnings in the second half of 2021 are likely to bear the brunt of supply chain issues and inflated costs, and thereby come in lower than previously anticipated. Citing the ongoing uncertainty, Timken has withdrawn its earlier provided earnings per share guidance between $5.15 and $5.45 for 2021.
In the first half of 2021, the company’s sales were $2.09 billion, reflecting an improvement of 21% year over year. This can primarily be attributed to higher organic revenues, favorable currency translation and contribution from the Aurora Bearing acquisition. Higher organic revenues were driven by increased demand across both the Mobile Industries and Process Industries segments, as most end markets improved year over year, with the off-highway, distribution, automotive and renewable energy sectors being the forerunners.
Adjusted earnings per share in the first half of 2021 was $2.75, indicating year-over-year growth of 29%. Gains from higher volume and related manufacturing performance, and favorable impact of foreign currency exchange rate changes were somewhat offset by higher material and logistics costs, unfavorable mix, and increased SG&A expenses in the first half of the year. Timken had also reported COVID-19 related supply chain disruptions and staffing issues.
The company informed that it continues to face customer and supply chain disruptions and related manufacturing inefficiencies, and persistent inflationary cost pressures in the ongoing quarter as well. Timken expects to mitigate the impact of these headwinds through improved operational efficiencies and pricing. On a brighter note, underlying customer demand and end-market momentum remains strong across most sectors. The industrial market is expected to be favorable for the remainder of 2021 and next year as well.
Timken’s diversity in terms of end market, customer, geography and innovation provide it with a competitive edge in this current uncertain environment. Efforts to enhance liquidity and strategic acquisition strategy are commendable as well. Over the past three years, Timken has been focusing on building its renewable energy portfolio, and it is currently the company’s largest individual end-market sector generating 12% of sales. The company is committed to targeted investments in this sector to capitalize on this trend, and make it a bigger part of its portfolio in the future.
Share Price Performance
Image Source: Zacks Investment Research
In the past year, shares of Timken have gained 23.9% compared with the industry’s rally of 27.1%.
Zacks Rank & Stocks to Consider
Timken currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include Encore Wire Corporation (WIRE - Free Report) , Deere & Company (DE - Free Report) and Lincoln Electric Holdings, Inc. (LECO - Free Report) . While Encore Wire sports a Zacks Rank #1 (Strong Buy), Deere & Lincoln Electric carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Encore Wire has a projected earnings growth rate of 332.6% for fiscal 2021. In a year’s time, the company’s shares have gained 77%.
Deere has an estimated earnings growth rate of 117.5% for fiscal 2021. The company’s shares have rallied 63.6% in a year’s time.
Lincoln Electric has an expected earnings growth rate of 45.1% for 2021. The stock has appreciated 44% over the past year.
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Timken (TKR) Expects Dull H2 Results on Supply Chain Issues
The Timken Company (TKR - Free Report) recently announced that its sales and earnings in the second half of 2021 are likely to bear the brunt of supply chain issues and inflated costs, and thereby come in lower than previously anticipated. Citing the ongoing uncertainty, Timken has withdrawn its earlier provided earnings per share guidance between $5.15 and $5.45 for 2021.
In the first half of 2021, the company’s sales were $2.09 billion, reflecting an improvement of 21% year over year. This can primarily be attributed to higher organic revenues, favorable currency translation and contribution from the Aurora Bearing acquisition. Higher organic revenues were driven by increased demand across both the Mobile Industries and Process Industries segments, as most end markets improved year over year, with the off-highway, distribution, automotive and renewable energy sectors being the forerunners.
Adjusted earnings per share in the first half of 2021 was $2.75, indicating year-over-year growth of 29%. Gains from higher volume and related manufacturing performance, and favorable impact of foreign currency exchange rate changes were somewhat offset by higher material and logistics costs, unfavorable mix, and increased SG&A expenses in the first half of the year. Timken had also reported COVID-19 related supply chain disruptions and staffing issues.
The company informed that it continues to face customer and supply chain disruptions and related manufacturing inefficiencies, and persistent inflationary cost pressures in the ongoing quarter as well. Timken expects to mitigate the impact of these headwinds through improved operational efficiencies and pricing. On a brighter note, underlying customer demand and end-market momentum remains strong across most sectors. The industrial market is expected to be favorable for the remainder of 2021 and next year as well.
Timken’s diversity in terms of end market, customer, geography and innovation provide it with a competitive edge in this current uncertain environment. Efforts to enhance liquidity and strategic acquisition strategy are commendable as well. Over the past three years, Timken has been focusing on building its renewable energy portfolio, and it is currently the company’s largest individual end-market sector generating 12% of sales. The company is committed to targeted investments in this sector to capitalize on this trend, and make it a bigger part of its portfolio in the future.
Share Price Performance
Image Source: Zacks Investment Research
In the past year, shares of Timken have gained 23.9% compared with the industry’s rally of 27.1%.
Zacks Rank & Stocks to Consider
Timken currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include Encore Wire Corporation (WIRE - Free Report) , Deere & Company (DE - Free Report) and Lincoln Electric Holdings, Inc. (LECO - Free Report) . While Encore Wire sports a Zacks Rank #1 (Strong Buy), Deere & Lincoln Electric carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Encore Wire has a projected earnings growth rate of 332.6% for fiscal 2021. In a year’s time, the company’s shares have gained 77%.
Deere has an estimated earnings growth rate of 117.5% for fiscal 2021. The company’s shares have rallied 63.6% in a year’s time.
Lincoln Electric has an expected earnings growth rate of 45.1% for 2021. The stock has appreciated 44% over the past year.