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Here's Why You Should Hold Timken (TKR) in Your Portfolio Now
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The Timken Company (TKR - Free Report) is benefiting from solid demand and price realization despite headwinds like supply-chain constraints and inflation. Other strategic actions, such as recent acquisitions and inventory management, are driving growth.
Timken currently has a Zacks Rank #3 (Hold).
Let’s delve deeper and analyze the factors that make this stock worth holding at present.
Solid Q4 Results: Timken reported adjusted earnings per share (EPS) of $1.22 in fourth-quarter 2022, marking 56% year-over-year growth.
Upbeat FY23 Guidance: Timken expects 2023 total revenues to be up 6% at the mid-point from the 2022 reported levels. Organic growth is expected at 3%. The company anticipates adjusted EPS between $6.50 and $7.10 per share for the year. The mid-point of the range indicates year-over-year growth of 13% from earnings per share of $6.02 reported in 2022. If delivered, it will be another record-setting year for revenues and earnings for the company.
Positive Earnings Surprise History: TKR has an average trailing four-quarter earnings surprise of 22.5%.
Healthy Growth Projections: The Zacks Consensus Estimate for Timken’s fiscal 2023 earnings is currently pegged at $6.86, indicating a 13.9% year-over-year increase. Earnings estimates have moved north by 2.8% in the past two months.
Growth Drivers in Place: Timken is benefiting from strong underlying customer demand and end-market momentum across most sectors. It continues to witness business wins in new markets and regions. The company expects the ongoing supply-chain challenges and inflationary cost pressure to be offset by significant price realization and operational excellence initiatives.
Timken continues to pursue strategic acquisitions to broaden its portfolio and capabilities across diverse markets, with a focus on bearings, adjacent power transmission products, and related services. In 2022, Timken completed the acquisition of Spinea, a technology leader and manufacturer of highly engineered cycloidal reduction gears and actuators.
Timken also acquired EnPro Industries' (NPO - Free Report) surface-engineering solutions business, GGB Bearing Technology, for $305 million in cash. GGB boasts a portfolio of metal polymer bearings, serving a wide range of industries.
Timken acquired the assets of American Roller Bearing Co. as well in 2022, which will augment the company’s market position in engineered bearings.
It announced that it would acquire Nadella Group, expanding the company’s linear motion portfolio in attractive market sectors. These two businesses generated revenues of approximately $140 million in 2022.
Timken is taking actions to enhance liquidity, reduce costs and generate strong cash flow. Recently, the company began expanding and accelerating certain structural cost reduction initiatives to align its costs with near-term demand expectations and improve its long-term profitability. These actions will help sustain margins. Moreover, the company has been adding to its inventory to meet the high customer demand and to accommodate supply-chain issues. This will help in mitigating internal and external supply-chain constraints and inefficiencies.
Near-Term Concerns
Timken’s margins have been impacted by higher operating costs and significant challenges with supply chains. The challenges ranged from higher-than-normal absenteeism and onboarding costs within plants, transportation delays, material shortages and premium costs associated with securing supply. Labor shortages and supply-chain constraints are expected to persist and may impair the company’s ability to capture the full opportunity that comes with a strong demand environment.
Even though the company raised prices, it lagged the magnitude of cost increases. Steel supply markets are anticipated to remain tight and prices are likely to continue to increase. The imposition of tariffs on certain foreign goods, including steel and other raw materials, has led to higher input costs for Timken.
Price Performance
In the past year, shares of Timken have gained 24.7% against the industry’s fall of 9.7%.
Alamo has an average trailing four-quarter earnings surprise of 6%. The Zacks Consensus Estimate for ALG’s 2023 earnings is pegged at $9.79 per share. This indicates a 13.6% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved north by 7.5% in the past 60 days. Its shares gained 21.3% in the last year.
The Zacks Consensus Estimate for Illinois Tool Works’ fiscal 2023 earnings per share is pegged at $9.61, suggesting an increase of 4.8% from that reported in the last year. The consensus estimate for fiscal 2023 earnings moved 4% upward in the last 60 days. ITW has a trailing four-quarter average earnings surprise of 0.9%. Its shares gained 8% in the last year.
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Here's Why You Should Hold Timken (TKR) in Your Portfolio Now
The Timken Company (TKR - Free Report) is benefiting from solid demand and price realization despite headwinds like supply-chain constraints and inflation. Other strategic actions, such as recent acquisitions and inventory management, are driving growth.
Timken currently has a Zacks Rank #3 (Hold).
Let’s delve deeper and analyze the factors that make this stock worth holding at present.
Solid Q4 Results: Timken reported adjusted earnings per share (EPS) of $1.22 in fourth-quarter 2022, marking 56% year-over-year growth.
Upbeat FY23 Guidance: Timken expects 2023 total revenues to be up 6% at the mid-point from the 2022 reported levels. Organic growth is expected at 3%. The company anticipates adjusted EPS between $6.50 and $7.10 per share for the year. The mid-point of the range indicates year-over-year growth of 13% from earnings per share of $6.02 reported in 2022. If delivered, it will be another record-setting year for revenues and earnings for the company.
Positive Earnings Surprise History: TKR has an average trailing four-quarter earnings surprise of 22.5%.
Healthy Growth Projections: The Zacks Consensus Estimate for Timken’s fiscal 2023 earnings is currently pegged at $6.86, indicating a 13.9% year-over-year increase. Earnings estimates have moved north by 2.8% in the past two months.
Growth Drivers in Place: Timken is benefiting from strong underlying customer demand and end-market momentum across most sectors. It continues to witness business wins in new markets and regions. The company expects the ongoing supply-chain challenges and inflationary cost pressure to be offset by significant price realization and operational excellence initiatives.
Timken continues to pursue strategic acquisitions to broaden its portfolio and capabilities across diverse markets, with a focus on bearings, adjacent power transmission products, and related services. In 2022, Timken completed the acquisition of Spinea, a technology leader and manufacturer of highly engineered cycloidal reduction gears and actuators.
Timken also acquired EnPro Industries' (NPO - Free Report) surface-engineering solutions business, GGB Bearing Technology, for $305 million in cash. GGB boasts a portfolio of metal polymer bearings, serving a wide range of industries.
Timken acquired the assets of American Roller Bearing Co. as well in 2022, which will augment the company’s market position in engineered bearings.
It announced that it would acquire Nadella Group, expanding the company’s linear motion portfolio in attractive market sectors. These two businesses generated revenues of approximately $140 million in 2022.
Timken is taking actions to enhance liquidity, reduce costs and generate strong cash flow. Recently, the company began expanding and accelerating certain structural cost reduction initiatives to align its costs with near-term demand expectations and improve its long-term profitability. These actions will help sustain margins. Moreover, the company has been adding to its inventory to meet the high customer demand and to accommodate supply-chain issues. This will help in mitigating internal and external supply-chain constraints and inefficiencies.
Near-Term Concerns
Timken’s margins have been impacted by higher operating costs and significant challenges with supply chains. The challenges ranged from higher-than-normal absenteeism and onboarding costs within plants, transportation delays, material shortages and premium costs associated with securing supply. Labor shortages and supply-chain constraints are expected to persist and may impair the company’s ability to capture the full opportunity that comes with a strong demand environment.
Even though the company raised prices, it lagged the magnitude of cost increases. Steel supply markets are anticipated to remain tight and prices are likely to continue to increase. The imposition of tariffs on certain foreign goods, including steel and other raw materials, has led to higher input costs for Timken.
Price Performance
In the past year, shares of Timken have gained 24.7% against the industry’s fall of 9.7%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Alamo Group (ALG - Free Report) and Illinois Tool Works (ITW - Free Report) . ALG flaunts a Zacks Rank #1 (Strong Buy) at present, and ITW has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alamo has an average trailing four-quarter earnings surprise of 6%. The Zacks Consensus Estimate for ALG’s 2023 earnings is pegged at $9.79 per share. This indicates a 13.6% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved north by 7.5% in the past 60 days. Its shares gained 21.3% in the last year.
The Zacks Consensus Estimate for Illinois Tool Works’ fiscal 2023 earnings per share is pegged at $9.61, suggesting an increase of 4.8% from that reported in the last year. The consensus estimate for fiscal 2023 earnings moved 4% upward in the last 60 days. ITW has a trailing four-quarter average earnings surprise of 0.9%. Its shares gained 8% in the last year.