Back to top

Image: Bigstock

John Bean (JBT) Bets on Orders & Acquisitions Amid High Costs

Read MoreHide Full Article

John Bean Technologies Corporation (JBT - Free Report) has been benefiting from higher order trends in both its segments — JBT FoodTech and JBT AeroTech. The company’s strategic acquisition program to add complementary products to its portfolio and efforts to develop innovative products have been driving growth as well. Raw material inflation, supply chain and logistics disruptions and higher labor costs are expected to weigh on its margins this year. However, the company’s Elevate plan to drive margin expansion, focus on process optimization efforts and its cost-cutting actions will aid margins.

Strong Order Levels to Fuel Revenues

In third-quarter 2021, the company witnessed a 24% surge in orders to $521 million compared with the prior-year quarter. Orders in the JBT FoodTech segment climbed 23% year over year. The segment has been witnessing sequential improvement in order levels over the past five quarters. Due to the pandemic, the food industry has experienced a surge in retail demand driven by packaged food purchases and positive recovery for certain customers across the food industry, specifically those in the quick service restaurant drive-through businesses and those servicing the sustained "eat-at-home" trend. The segment has also been seeing recovery in the foodservice side, and robust orders for its automated guided vehicle business. This bodes well for the FoodTech segment.

The AeroTech segment’s orders rose 25%. Orders are showing signs of recovery, backed by demand from infrastructure, cargo, and defense markets, and improvement from airline customers. Passenger airline industry contributes a significant portion to the segment’s revenues. Passenger air travel has been picking up from 2020 levels, courtesy of vaccination initiatives globally and re-opening of travel routes. Airport infrastructure spending, which is subject to long lead time contracts, is anticipated to remain healthy for the balance of 2021. Aftermarket revenues are also gaining steam as equipment utilization increases for customers in line with air traffic demand.

Cost Inflation, Supply Chain Issues Persist

The company has been witnessing material inflation, supply chain and logistics disruptions, and higher labor costs this year. Particularly in the AeroTech segment, shortage of critical raw material, components and labor impeded its ability to build and ship equipment and increased the overall cost of running the business.

Due to these factors, the company now projects adjusted earnings per share between $4.15 and $4.25 for 2021, down from the prior projection of $4.60-$4.80. The mid-point of the range suggests growth of 7% from 2020. The company expects total revenue expansion of 9-10%, lower than the earlier provided guidance of revenue growth of 10-13%.

Cost Reduction to Drive Margins

John Bean has been delivering strong EBITDA margin performance, driven by the company’s recent process optimization efforts and JBT Operating System discipline, and rapid implementation of cost-cutting actions. In third-quarter 2020, the company implemented a restructuring plan for manufacturing capacity rationalization affecting both the FoodTech and AeroTech segments. These restructuring actions are expected to generate incremental cost savings during 2021. John Bean’s Elevate plan is likely to drive continued growth and margin expansion. Per the plan, the company is focusing on accelerating development of innovative products and services to provide customers with solutions, which will enhance yield and productivity. These efforts will help the company counter input cost inflation that is currently plaguing the industry.

Concerted Efforts to Grow Business

John Bean intends to ramp up initiatives that were previously underway to bring automation solutions to the protein market. Liquid Foods’ end products such as juice, canned foods and ready meals continue to witness high retail demand. The protein market has a total estimated market size of $18 billion. The Liquid food market has a worth of $8 billion. The company has ample scope to grow in both markets.

The company is capitalizing on its extensive installed base to expand recurring revenues (which accounts for around 40% of its revenues) from aftermarket parts and services, equipment leases, consumables and airport services. In AeroTech, the company plans to continue developing advanced military product offerings and customer support capabilities to service global military customers.

Acquisitions Remain a Key Catalyst

John Bean has a strategic acquisition program focused on companies that add complementary products, which enable it to offer more comprehensive solutions to customers. In the last few years, the company acquired Proseal UK Limited, Prime Equipment Group and certain assets and liabilities of MARS Food Processing Solutions. Earlier this year, the company bought AutoCoding Systems to strengthen its abilities in the growing global market for in-line coding and inspection solutions. Its buyout of Prevenio expands recurring revenue stream and ability to address food safety needs of customers. It recently acquired Navarra, Spain-based Urtasun Tecnología Alimentaria S.L, which expanded its product offering in fruit and vegetable processing, particularly in the fresh packaged and frozen markets.

Share Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research

The stock has gained 51.4% in the past year, compared with the industry’s rally of 57.3%.

Zacks Rank & Stocks to Consider

John Bean currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include Emerson Electric Co. (EMR - Free Report) , Zebra Technologies (ZBRA - Free Report) and SiteOne Landscape Supply, Inc. (SITE - Free Report) . All of these stocks flaunt a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Emerson Electric has an expected earnings growth rate of around 17.6% for the current year. The Zacks Consensus Estimate for the current-year earnings has been revised upward by 5% in the past 30 days.

Emerson Electric is poised to benefit from strength across its end markets, robust backlog level and acquisitions. Its shares have gained 21% in a year. EMR has a trailing four-quarter earnings surprise of 10.7%, on average.

Zebra Technologies has a projected earnings growth rate of around 42% for 2021. The Zacks Consensus Estimate for the current-year earnings has been revised upward by 5% in the past 30 days.

Zebra Technologies has a trailing four-quarter earnings surprise of 12.9%, on average. The shares of ZBRA have appreciated 61% in a year, courtesy of a solid demand environment, and expected benefits from investments in growth initiatives and acquisitions.

SiteOne Landscape has an estimated earnings growth rate of around 77% for the current year. In the past 30 days, the Zacks Consensus Estimate for the current-year earnings has been revised upward by 14%.

SiteOne Landscape is poised to benefit from solid product offerings, acquired assets, growth investments, and solid operational and commercial execution. Its shares have soared 85% in the past year. SITE has a trailing four-quarter earnings surprise of 130.9%, on average.