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Barnes Group Inc. (B - Free Report) reported impressive results for the third quarter of 2021. Its earnings surpassed estimates by 10% and sales beat the same by 2.25%.
Its adjusted earnings in the reported quarter were 55 cents per share, surpassing the Zacks Consensus Estimate of 50 cents. Also, the bottom line increased 83.3% from the year-ago quarter figure of 30 cents on the back of higher sales generation and improved margins.
Top-Line Results
In the reported quarter, Barnes’ net sales increased 20.8% year over year to $325.1 million. Organic sales in the quarter grew 20% year over year on strengthening segmental businesses. Movements in foreign currencies had a positive impact of 1%.
It is worth noting here that third-quarter sales rose 1% from second-quarter 2021.
The company’s revenues surpassed the Zacks Consensus Estimate of $318 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 $231.5 million, increasing 17.6% year over year. The segment gained from strengthening end-market businesses. Organic sales were up 17% year over year and movements in foreign currencies had a positive impact of 1%.
Aerospace’s sales were $93.5 million in the third quarter, up 29.6% from the year-ago quarter on the back of improvement in the aerospace markets.
Aftermarket sales were up 46% year over year, while that for original equipment manufacturing increased 23%.
Margin Profile
In the reported quarter, Barnes’ cost of sales increased 15.9% year over year to $205.1 million. Notably, the cost of sales represented 63.1% of net sales versus 65.8% in the year-ago quarter. Selling and administrative expenses increased 25.2% year over year to $76.3 million and represented 23.5% of net sales.
Adjusted operating income in the reported quarter increased 39.1% year over year to $43.9 million, whereas margin grew 180 basis points to 13.5%. High freight and raw material costs played spoilsport in the quarter. Interest expenses totaled $4 million in the reported quarter, up 8.8% year over year. The effective tax rate in the quarter was 27.6%, lower than 44.1% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the third quarter, Barnes’ cash and cash equivalents were $93.5 million, up 2.6% from $91.1 million recorded in the last reported quarter. Long-term debt was $628.7 million, reflecting a 3.9% decline from $654.5 million in the last reported quarter.
In the first three quarters, the company repaid long-term debt of $73.1 million. Proceeds from the issuance of long-term debts were $25 million. Liquidity available in the quarter included cash of $93 million and credit under revolving facilities of $477 million.
In the first nine months of 2021, the company generated net cash of $127.8 million from operating activities, down 22% from the year-ago period. Capital expenditure totaled $26.7 million, decreasing 11.4% year over year. Free cash flow was $101.1 million versus $133.7 million in the year-ago period.
In the first nine months of 2021, Barnes paid out dividends of $24.3 million, suggesting no change from the prior-year period. Shares worth $5.2 million were repurchased in the first nine months of 2021.
Outlook
For 2021, Barnes anticipates adjusted earnings of $1.83-$1.93, revised from the previously mentioned $1.83-$1.98 per share. The revised projection suggests year-over-year growth of 12-18%.
Organic sales for the year are expected to rise 11-12% on a year-over-year basis. The projection was unchanged. Movements in foreign currencies are expected to boost sales by 2% (maintained). Divestiture impact is expected to be adverse 1% (maintained).
The operating margin is predicted to be 12.5%, down from the 13% mentioned earlier due to expected adverse impacts of freight costs and raw material on industrial businesses. The company anticipates a capital expenditure of $40 million, down from the previously mentioned $50 million. Cash conversion is expected to exceed 120% of net income (higher than 110% discussed earlier). The effective tax rate for 2021 is expected to be 29% (lower than the 30% mentioned previously).
Barnes Group, Inc. Price, Consensus and EPS Surprise
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Barnes (B) Beats Q3 Earnings Estimates, Lowers '21 EPS View
Barnes Group Inc. (B - Free Report) reported impressive results for the third quarter of 2021. Its earnings surpassed estimates by 10% and sales beat the same by 2.25%.
Its adjusted earnings in the reported quarter were 55 cents per share, surpassing the Zacks Consensus Estimate of 50 cents. Also, the bottom line increased 83.3% from the year-ago quarter figure of 30 cents on the back of higher sales generation and improved margins.
Top-Line Results
In the reported quarter, Barnes’ net sales increased 20.8% year over year to $325.1 million. Organic sales in the quarter grew 20% year over year on strengthening segmental businesses. Movements in foreign currencies had a positive impact of 1%.
It is worth noting here that third-quarter sales rose 1% from second-quarter 2021.
The company’s revenues surpassed the Zacks Consensus Estimate of $318 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 $231.5 million, increasing 17.6% year over year. The segment gained from strengthening end-market businesses. Organic sales were up 17% year over year and movements in foreign currencies had a positive impact of 1%.
Aerospace’s sales were $93.5 million in the third quarter, up 29.6% from the year-ago quarter on the back of improvement in the aerospace markets.
Aftermarket sales were up 46% year over year, while that for original equipment manufacturing increased 23%.
Margin Profile
In the reported quarter, Barnes’ cost of sales increased 15.9% year over year to $205.1 million. Notably, the cost of sales represented 63.1% of net sales versus 65.8% in the year-ago quarter. Selling and administrative expenses increased 25.2% year over year to $76.3 million and represented 23.5% of net sales.
Adjusted operating income in the reported quarter increased 39.1% year over year to $43.9 million, whereas margin grew 180 basis points to 13.5%. High freight and raw material costs played spoilsport in the quarter. Interest expenses totaled $4 million in the reported quarter, up 8.8% year over year. The effective tax rate in the quarter was 27.6%, lower than 44.1% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the third quarter, Barnes’ cash and cash equivalents were $93.5 million, up 2.6% from $91.1 million recorded in the last reported quarter. Long-term debt was $628.7 million, reflecting a 3.9% decline from $654.5 million in the last reported quarter.
In the first three quarters, the company repaid long-term debt of $73.1 million. Proceeds from the issuance of long-term debts were $25 million. Liquidity available in the quarter included cash of $93 million and credit under revolving facilities of $477 million.
In the first nine months of 2021, the company generated net cash of $127.8 million from operating activities, down 22% from the year-ago period. Capital expenditure totaled $26.7 million, decreasing 11.4% year over year. Free cash flow was $101.1 million versus $133.7 million in the year-ago period.
In the first nine months of 2021, Barnes paid out dividends of $24.3 million, suggesting no change from the prior-year period. Shares worth $5.2 million were repurchased in the first nine months of 2021.
Outlook
For 2021, Barnes anticipates adjusted earnings of $1.83-$1.93, revised from the previously mentioned $1.83-$1.98 per share. The revised projection suggests year-over-year growth of 12-18%.
Organic sales for the year are expected to rise 11-12% on a year-over-year basis. The projection was unchanged. Movements in foreign currencies are expected to boost sales by 2% (maintained). Divestiture impact is expected to be adverse 1% (maintained).
The operating margin is predicted to be 12.5%, down from the 13% mentioned earlier due to expected adverse impacts of freight costs and raw material on industrial businesses. The company anticipates a capital expenditure of $40 million, down from the previously mentioned $50 million. Cash conversion is expected to exceed 120% of net income (higher than 110% discussed earlier). The effective tax rate for 2021 is expected to be 29% (lower than the 30% mentioned previously).
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 $2.1 billion, Barnes currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the industry are DXP Enterprises, Inc. (DXPE - Free Report) , Nordson Corporation (NDSN - Free Report) , and Applied Industrial Technologies, Inc. (AIT - Free Report) . While DXP Enterprises currently sports a Zacks Rank #1 (Strong Buy), both Nordson and Applied Industrial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for these companies improved for the current year.