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Timken (TKR) Earnings Miss, Revenues Beat Estimates in Q4

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The Timken Company (TKR - Free Report) reported adjusted earnings per share (EPS) of 78 cents during the fourth-quarter 2021, missing the Zacks Consensus Estimate of 92 cents. The bottom line declined 7% year over year, owing to unfavorable price-cost.

On a reported basis, the company delivered earnings of 82 cents per share in the quarter under review compared with 69 cents in the prior-year quarter.

Total revenues in the quarter were $1,007 million, up 13% from the year-ago quarter’s levels. The upside can be attributed to strong organic growth across most end-market sectors, driven by industrial distribution and off-highway as well as the favorable impact of higher pricing. The top line surpassed the Zacks Consensus Estimate of $982 million.

Costs and Margins

Cost of sales rose 18% to $774 million from the prior-year quarter’s levels. Gross profit contracted 1.6% year over year to $233 million. The gross margin was 23.1% compared with 26.5% in the year-ago quarter.

Selling, general and administrative expenses were up 8% year over year to $146 million. Adjusted EBITDA declined 6% year over year to $135 million. Adjusted EBITDA margin in the quarter was 13.4% compared with 16.2% in the prior-year quarter.

Timken Company The Price, Consensus and EPS Surprise

 

Timken Company The Price, Consensus and EPS Surprise

Timken Company The price-consensus-eps-surprise-chart | Timken Company The Quote

 

Segment Performance

The Mobile Industries segment’s revenues improved 10.6% to $479.7 million from the year-ago quarter’s levels. Higher shipments in most end-market sectors, strong off-highway truck sectors and the favorable impact of higher pricing led to the uptick. The segment’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) declined 23% year over year to $41 million.

The Process Industries segment’s revenues rose 15% year over year to $528 million in fourth-quarter 2021, primarily on account of strong organic growth in most sectors led by distribution and general industrial sectors. The segment’s adjusted EBITDA was up 2.8% year over year to $105 million.

Financial Position

Timken had cash and cash equivalents of $257 million at the end of 2021, down from $320 million at the end of 2020. Cash flow from operations was around $387 million in 2021 compared with $578 million in the prior year. During the fourth quarter, Timken returned $59.1 million of cash to shareholders through dividends and share repurchases.

Long-term debt as of Dec 31, 2021, was $1.41 billion compared with $1.43 billion as of Dec 31, 2020. Net debt to adjusted EBITDA was at 1.7 as of Dec 31, 2021, compared with 1.9 as of Dec 31, 2020.

2021 Performance

Timken reported a record adjusted EPS of $4.72 in 2021 compared with $4.10 reported in the prior year. However, earnings missed the Zacks Consensus Estimate of $4.84. Including one-time items, the bottom line came in at a record $4.79, up 28.7% from $3.72 reported in 2020.

Sales were up 17.6% year over year to $4.13 billion. The top line came in line with the Zacks Consensus Estimate.

2022 Guidance

Timken expects the current year’s total revenues to be up around 10% compared with 2021 levels. Adjusted EPS for the year is expected between $5.00 and $5.40. The company anticipates strong revenues and earnings growth in 2022, driven by robust industrial demand, benefits from price realization and growth initiatives. Supply chain challenges and inflationary cost pressure will continue in the current year as well. These are likely to be offset by significant price realization and operational excellence initiatives.

Price Performance

In the past year, shares of Timken have lost 5.8% compared with the industry’s decline of 0.7%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Zacks Rank & Stocks to Consider

Timken currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include Dover Corporation (DOV - Free Report) , Silgan Holdings Inc. (SLGN - Free Report) and Applied Industrial Technologies, Inc. (AIT - Free Report) . All the stocks carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dover’s fourth-quarter 2021 adjusted EPS increased 15% year over year to $1.78, beating the Zacks Consensus Estimate of $1.66. DOV has a trailing four-quarter earnings surprise of 12.3%, on average.

Dover has an estimated earnings growth rate of around 12.7% for 2022. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 4%. DOV’s shares have rallied around 44.5% in a year.

Silgan Holdings’ fourth-quarter 2021 adjusted EPS increased 32% year over year to a record 79 cents, beating the Zacks Consensus Estimate of 73 cents. SLGN has a trailing four-quarter earnings surprise of 3.8%, on average.

Silgan has a projected earnings growth rate of 13.5% for the current year. The Zacks Consensus Estimate for 2022 earnings has moved north by 3% in the past 60 days. In a year, SLGN has appreciated 19.7%.

Applied Industrial Technologies reported adjusted EPS of $1.46 per share in second-quarter fiscal 2022 (ended Dec 31, 2020), up 49% year on year and beating the Zacks Consensus Estimate of $1.09. AIT has a trailing four-quarter earnings surprise of 27.9%, on average.

Applied Industrial Technologies has an expected earnings growth rate of 24.8% for fiscal 2022. The Zacks Consensus Estimate for fiscal year earnings has moved up by 9.4% in the past 60 days. AIT’s shares have appreciated 36% in a year.