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Timken (TKR) Earnings & Sales Surpass Estimates in Q1, Up Y/Y

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The Timken Company (TKR - Free Report) reported adjusted earnings per share (EPS) of a record $1.61 in first-quarter 2022, beating the Zacks Consensus Estimate of $1.15 per share. The bottom line increased 17% year over year, owing to higher customer demand and benefits from pricing actions.

On a reported basis, the company delivered earnings of a record $1.56 per share in the quarter under review compared with $1.47 per share in the prior-year quarter.

Total revenues in the quarter were record $1,125 million, up 9.7% from the year-ago quarter’s levels. The upside can be attributed to strong growth across most end-market sectors, driven by industrial distribution and off-highway as well as the favorable impact of higher pricing, partly offset by unfavorable currency. The top line surpassed the Zacks Consensus Estimate of $1,116 million.

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

 

Costs and Margins

Cost of sales rose 9.8% to $797 million from the prior-year quarter’s levels. Gross profit increased 9% year over year to $327 million. The gross margin was 29.1%, flat year over year.

Selling, general and administrative expenses were up 7% year over year to $154 million. Adjusted EBITDA increased 17% year over year to $158 million. Adjusted EBITDA margin in the quarter was 27.1% compared with 26% in the prior-year quarter.

Segment Performance

The Mobile Industries segment’s revenues rose 7.1% year over year to $540 million. Higher shipments in the off-highway and rail sectors and the favorable impact of higher pricing led to the uptick. The segment’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $79 million compared with the year-ago quarter’s $80 million.

The Process Industries segment’s revenues rose 12% year over year to $584 million in first-quarter 2022, primarily on account of strong growth in most sectors led by distribution and general industrial sectors and the impact of higher pricing. These were partly offset by lower revenues in the renewable energy sector and unfavorable currency. The segment’s adjusted EBITDA was up 17% year over year to $158 million.

Financial Position

Timken had cash and cash equivalents of $425 million at the end of the first quarter, up from $257 million at the end of 2021. Cash utilized in operating activities was $1.2 million in the first quarter against the cash generation of $32 million in the prior-year period. During the first quarter, Timken returned $124 million of cash to shareholders through dividends and share repurchases.

Long-term debt as of Mar 31, 2022, was $1.75 billion compared with $1.41 billion as of Dec 31, 2021. Net debt to adjusted EBITDA was 1.8 as of Mar 31, 2022, compared with 1.7 as of Dec 31, 2021.

2022 Guidance

Timken now expects the current year’s total revenues to be up around 8% compared with 2021 levels, reflecting the impact from operations suspension in Russia and expected unfavorable impact of unfavorable currency translation. The company reaffirms adjusted EPS guidance for the year in between $5.00 and $5.40. The company anticipates double-digit earnings growth in 2022, driven by robust demand for industrial products, improved operational execution and benefits from price realization.

Price Performance

In the past year, shares of Timken have lost 32% compared with the industry’s decline of 26%.

Zacks Investment Research
Image 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 are Alcoa (AA - Free Report) , Packaging Corporation of America (PKG - Free Report) and Graphic Packaging Holding Company (GPK - Free Report) . All of these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alcoa has a projected earnings growth rate of 107% for the current year. The Zacks Consensus Estimate for 2022 earnings has moved north by 76% in the past 60 days.

Alcoa delivered a trailing four-quarter earnings surprise of 17.4%, on average. Alcoa’s shares have surged 69.3% in the past year.

Packaging Corporation has an expected earnings growth rate of 16.2% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 4.2% in the past 60 days.

PKG has a trailing four-quarter earnings surprise of 19.6%, on average. Packaging Corporation’s shares have gained 5.4% in the past year.

Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.

Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 14.8% in a year’s time.