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Reasons Why You Should Avoid Betting on Barnes (B) Stock Now
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Barnes Group Inc. (B - Free Report) has failed to impress investors with its recent operational performance on account of softness in the Industrial segment, rising operating costs and increasing debt level. These factors are likely to impede Barnes’ earnings in the quarters ahead.
Let’s discuss the factors, which are likely to continue taking a toll on this current Zacks Rank #4 (Sell) company.
Business Weakness: Weak motion control solutions and automation businesses have been adversely affecting the Industrial segment. Shipment delays and lagging orders remain worrisome for the segment. In the fourth quarter of 2023, the Aerospace segment’s adjusted operating margin declined 360 basis points year over year due to long-term intangible amortization from the MB Aerospace acquisition. Also, in the same period, organic sales in the Motion Control Solutions and Automation businesses declined 10% and 7%, respectively. Higher-than-expected transformation costs, slowdown in the U.S. economy, geopolitical instability and labor productivity challenges are likely to impact Barnes’ performance in the near term.
Steep Costs: Barnes has been dealing with the adverse impacts of the high cost of sales and operating expenses. The company’s cost of sales in 2023 increased 44% year over year. High raw material and labor costs are pushing up the cost of sales. Selling and administrative expenses also rose 4.5% in the same period. Escalating costs, if unchecked, can be detrimental to Barnes’ margins and profitability.
High Debt: High debt levels are concerning for the company as it raises financial obligations and might drain its profitability. Barnes exited fourth-quarter 2023 with a long-term debt of $1.3 billion, significantly higher than $569.6 million in 2022 end. Also, increasing interest expenses are worrisome for the company. Barnes’ interest expense was $23.6 million in the fourth quarter compared with $4.4 million in the year-ago period. The increase was due to the MB Aerospace acquisition. It is worth noting that the high interest expense drove the majority of the year-over-year decline in adjusted earnings per share (down 21% in the fourth quarter).
Southbound Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for B’s 2024 earnings has been revised 1.2% downward.
Price Performance: Shares of the company have lost 13.3% in the past year against the industry’s 29.9% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked companies from the Industrial Products sector are discussed below:
Image: Bigstock
Reasons Why You Should Avoid Betting on Barnes (B) Stock Now
Barnes Group Inc. (B - Free Report) has failed to impress investors with its recent operational performance on account of softness in the Industrial segment, rising operating costs and increasing debt level. These factors are likely to impede Barnes’ earnings in the quarters ahead.
Let’s discuss the factors, which are likely to continue taking a toll on this current Zacks Rank #4 (Sell) company.
Business Weakness: Weak motion control solutions and automation businesses have been adversely affecting the Industrial segment. Shipment delays and lagging orders remain worrisome for the segment. In the fourth quarter of 2023, the Aerospace segment’s adjusted operating margin declined 360 basis points year over year due to long-term intangible amortization from the MB Aerospace acquisition. Also, in the same period, organic sales in the Motion Control Solutions and Automation businesses declined 10% and 7%, respectively. Higher-than-expected transformation costs, slowdown in the U.S. economy, geopolitical instability and labor productivity challenges are likely to impact Barnes’ performance in the near term.
Steep Costs: Barnes has been dealing with the adverse impacts of the high cost of sales and operating expenses. The company’s cost of sales in 2023 increased 44% year over year. High raw material and labor costs are pushing up the cost of sales. Selling and administrative expenses also rose 4.5% in the same period. Escalating costs, if unchecked, can be detrimental to Barnes’ margins and profitability.
High Debt: High debt levels are concerning for the company as it raises financial obligations and might drain its profitability. Barnes exited fourth-quarter 2023 with a long-term debt of $1.3 billion, significantly higher than $569.6 million in 2022 end. Also, increasing interest expenses are worrisome for the company. Barnes’ interest expense was $23.6 million in the fourth quarter compared with $4.4 million in the year-ago period. The increase was due to the MB Aerospace acquisition. It is worth noting that the high interest expense drove the majority of the year-over-year decline in adjusted earnings per share (down 21% in the fourth quarter).
Southbound Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for B’s 2024 earnings has been revised 1.2% downward.
Price Performance: Shares of the company have lost 13.3% in the past year against the industry’s 29.9% growth.
Image Source: Zacks Investment Research
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). It has a trailing four-quarter average earnings surprise of 10.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for AIT’s fiscal 2024 earnings has increased 2.5% in the past 60 days. The stock has gained 39.9% in the past year.
Caterpillar Inc. (CAT - Free Report) presently carries a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 19.7%, on average.
CAT’s earnings estimates have increased 0.7% for 2024 in the past 60 days. Shares of Caterpillar have risen 62.3% in the past year.
A. O. Smith Corporation (AOS - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 12%.
The Zacks Consensus Estimate for AOS’ 2024 earnings increased 0.5% in the past 60 days. Shares of A. O. Smith have soared 28% in the past year.