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Barnes Group (B) to Gain From Strong End Markets Amid Woes

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Barnes Group, Inc. (B - Free Report) has been benefiting from strength across its molding solutions, force & motion control, engineered components, and automation businesses. Strength in the company’s electric vehicle, medical, advanced plastics, and automation end markets along with the introduction of products is likely to drive its performance in the quarters ahead. For 2021, it expects organic sales to grow 11-12% on a year-over-year basis.

The company’s well-diversified portfolio, focus on innovation and digital advancement, strategic marketing and commercial excellence, and solid operational execution are also likely to be beneficial. For 2021, it anticipates earnings of $1.83-$1.98 per share, higher than the previously stated $1.78-$1.98.

It remains focused on rewarding shareholders handsomely through dividend payouts and share buyback programs. In the first six months of 2021, the company paid out dividends worth $16.2 million and repurchased shares worth $5.2 million. The buybacks were made to neutralize the impact of equity compensation dilution. Exiting the second quarter, it was left to buy back 3.6 million shares under its approved share repurchase programs.

The reduction of debts also remains one of its priorities. The company repaid long-term debts of $56.5 million in the first half of 2021.

However, the company has been experiencing weakness in the aerospace aftermarket business due to a low demand environment in maintenance, repair, & operations and spare parts end markets. Barnes expects the weakness to persist in the near term and affect its performance.

Escalating costs and expenses also remains a concern for the company. In the second quarter, its cost of sales increased 38.2% year over year and its selling and administrative expenses grew 1.4%. Also, owing to the company’s extensive geographic presence, its operations are subject to forex woes. A stronger U.S. dollar might hurt its overseas business in quarters ahead.

The company faces stiff competition from several of its peers in the industry like ESCO Technologies Inc. (ESE - Free Report) , Woodward, Inc. (WWD - Free Report) , and TriMas Corporation (TRS - Free Report) .


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