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Here's Why You Should Avoid Betting on Barnes Group (B) Stock
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Barnes Group Inc. (B - Free Report) has failed to impress investors with its recent operational performance due to tough end-market conditions and other challenges, which are likely to adversely impact its earnings.
Image Source: Zacks Investment Research
The Zacks Rank #4 (Sell) company has a market capitalization of nearly $1.7 billion. In the past six months, it has lost 26.9% compared with the industry’s decline of 22.5%.
Let’s discuss the factors that might continue to take a toll on the firm.
Soft End-Market Conditions: Persistent softness in automotive and industrial end markets on account of the supply chain challenges and pandemic-related issues in China have been adversely impacting the company’s Industrial segment’s performance. In first-quarter 2022, sales from its industrial segment declined 4% year over year, owing to the end-market and supply-chain challenges. The company expects global automotive production to remain under pressure and supply chain issues to persist in 2022, likely affecting its revenues in the quarters ahead.
High Costs and Expenses: Barnes Group has been dealing with the adverse impacts of increasing cost of sales and operating expenses. In first-quarter 2022, its cost of sales increased 6.4% year over year to $207.2 million, representing 66.3% of net sales. Also, its selling and administrative expenses remained high at $74.1 million, representing 23.7% of net sales. In the first quarter, its adjusted operating margin decreased 50 basis points year over year. For 2022, difficulty in raw material availability and inflation in costs, as well as high freight costs, are likely to continue affecting its margins and profitability.
The company’s high capital expenditure might also hurt its short-term liquidity. For 2022, it expects to incur capital expenditure of $50-$55 million, suggesting a year-over-year increase of 54%.
Forex Woes: Given its widespread presence in international markets, Barnes Group is exposed to unfavorable foreign currency movements. For instance, in first-quarter 2022, foreign exchange headwinds had an adverse impact of 3% on its Industrial segment’s sales. A stronger U.S. dollar might depress the company's overseas business results in the quarters ahead.
High Tax Rate: High effective tax rates remains a concern, with Barnes Group predicting a 24-25% rate for 2022. The rate suggests an increase from 21.9% recorded in 2021. This might adversely impact its earnings in the year.
Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for B’s 2022 earnings has declined from $2.31 to $2.20 on three downward estimate revisions against none upward. Over the same timeframe, the consensus estimate for 2023 earnings has decreased from $2.85 to $2.75 on three downward estimate revisions against none upward.
Zacks Rank & Stocks to Consider
Some better-ranked companies from the industrial products sector are discussed below.
AIT’s earnings estimates have increased 5.9% for fiscal 2022 (ending June 2022) in the past 60 days. Its shares have lost 4.5% in the past six months.
Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.
In the past 60 days, ROP’s earnings estimates have increased 1.1% for 2022. The stock has declined 13.9% in the past six months.
Ferguson plc (FERG - Free Report) is presently Zacks #2 Ranked. FERG’s earnings surprise in the last four quarters was 14.2%, on average.
In the past 60 days, the stock’s earnings estimates have increased 1% for fiscal 2022 (ending July 2022). The same has declined 25.4% in the past six months.
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Here's Why You Should Avoid Betting on Barnes Group (B) Stock
Barnes Group Inc. (B - Free Report) has failed to impress investors with its recent operational performance due to tough end-market conditions and other challenges, which are likely to adversely impact its earnings.
Image Source: Zacks Investment Research
The Zacks Rank #4 (Sell) company has a market capitalization of nearly $1.7 billion. In the past six months, it has lost 26.9% compared with the industry’s decline of 22.5%.
Let’s discuss the factors that might continue to take a toll on the firm.
Soft End-Market Conditions: Persistent softness in automotive and industrial end markets on account of the supply chain challenges and pandemic-related issues in China have been adversely impacting the company’s Industrial segment’s performance. In first-quarter 2022, sales from its industrial segment declined 4% year over year, owing to the end-market and supply-chain challenges. The company expects global automotive production to remain under pressure and supply chain issues to persist in 2022, likely affecting its revenues in the quarters ahead.
High Costs and Expenses: Barnes Group has been dealing with the adverse impacts of increasing cost of sales and operating expenses. In first-quarter 2022, its cost of sales increased 6.4% year over year to $207.2 million, representing 66.3% of net sales. Also, its selling and administrative expenses remained high at $74.1 million, representing 23.7% of net sales. In the first quarter, its adjusted operating margin decreased 50 basis points year over year. For 2022, difficulty in raw material availability and inflation in costs, as well as high freight costs, are likely to continue affecting its margins and profitability.
The company’s high capital expenditure might also hurt its short-term liquidity. For 2022, it expects to incur capital expenditure of $50-$55 million, suggesting a year-over-year increase of 54%.
Forex Woes: Given its widespread presence in international markets, Barnes Group is exposed to unfavorable foreign currency movements. For instance, in first-quarter 2022, foreign exchange headwinds had an adverse impact of 3% on its Industrial segment’s sales. A stronger U.S. dollar might depress the company's overseas business results in the quarters ahead.
High Tax Rate: High effective tax rates remains a concern, with Barnes Group predicting a 24-25% rate for 2022. The rate suggests an increase from 21.9% recorded in 2021. This might adversely impact its earnings in the year.
Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for B’s 2022 earnings has declined from $2.31 to $2.20 on three downward estimate revisions against none upward. Over the same timeframe, the consensus estimate for 2023 earnings has decreased from $2.85 to $2.75 on three downward estimate revisions against none upward.
Zacks Rank & Stocks to Consider
Some better-ranked companies from the industrial products sector are discussed below.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). AIT delivered a trailing four-quarter earnings surprise of 25.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AIT’s earnings estimates have increased 5.9% for fiscal 2022 (ending June 2022) in the past 60 days. Its shares have lost 4.5% in the past six months.
Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.
In the past 60 days, ROP’s earnings estimates have increased 1.1% for 2022. The stock has declined 13.9% in the past six months.
Ferguson plc (FERG - Free Report) is presently Zacks #2 Ranked. FERG’s earnings surprise in the last four quarters was 14.2%, on average.
In the past 60 days, the stock’s earnings estimates have increased 1% for fiscal 2022 (ending July 2022). The same has declined 25.4% in the past six months.