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Why Is Timken (TKR) Up 0.4% Since Last Earnings Report?
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A month has gone by since the last earnings report for Timken (TKR - Free Report) . Shares have added about 0.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Timken due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Timken Earnings & Sales Surpass Estimates in Q1, Up Y/Y
Timken reported adjusted 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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Timken has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Timken has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Timken (TKR) Up 0.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Timken (TKR - Free Report) . Shares have added about 0.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Timken due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Timken Earnings & Sales Surpass Estimates in Q1, Up Y/Y
Timken reported adjusted 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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Timken has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Timken has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.