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Reasons Why You Should Avoid Investing in Barnes Group (B)

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Barnes Group Inc. (B - Free Report) is persistently grappling with supply-chain constraints, rising raw material costs and foreign-currency headwinds.

Zacks Investment Research
Image Source: Zacks Investment Research

The currently Zacks Rank #4 (Sell) player has a market capitalization of $1.7 billion. In the past six months, the stock has lost 26.2% against the industry's growth of 0.2%.

Let’s discuss the factors that might continue to take a toll on the firm.

Soft End-Market Conditions: Incessant softness in the industrial segment on account of the supply-chain challenges and the ongoing Ukraine conflict has been adversely impacting Barnes Group’s performance for a while. Also, COVID-related operational disruption in the aerospace market may be detrimental to B’s Aerospace segment’s performance in the quarters ahead. In second-quarter 2022, supply-chain challenges hurt Barnes Group’s revenues. If not checked, supply-chain constraints may persist throughout 2022, eroding its sales.

High Costs and Expenses: Barnes Group has been dealing with the adverse impacts of increasing cost of sales and operating expenses. In second-quarter 2022, its cost of sales increased 4.7% year over year to $212.8 million, representing 66.2% of net sales. In the same period, its adjusted operating margin decreased 2080 basis points year over year. Inflation in raw material costs and high freight costs are likely to continue affecting its margins and profitability in 2022.

Forex Woes: Given its widespread presence in the international markets, Barnes Group is exposed to unfavorable foreign currency movements. For instance, in second-quarter 2022, foreign exchange headwinds had an adverse impact of 6% on its Industrial segment’s sales. Also, adverse movements in foreign currencies are expected to hurt sales 3% in 2022. A stronger U.S. dollar might depress B's overseas business results in the quarters ahead.

Southbound Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for 2022 earnings has been revised 10.9% downward.

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 22.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks

AIT’s earnings estimates have increased 5.8% for fiscal 2023 (ending June 2023) in the past 60 days. Its shares have rallied 17.5% in the past six months.

Greif, Inc. (GEF - Free Report) presently has a Zacks Rank #2 (Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average.

GEF’s earnings estimates have increased 0.4% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 24.7% in the past six months.

Valmont Industries, Inc. (VMI - Free Report) presently has a Zacks Rank of 2. VMI’s earnings surprise in the last four quarters was 13.7%, on average.

In the past 60 days, Valmont’s earnings estimates have increased 3.8% for 2022. The stock has rallied 36.5% in the past six months.

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