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Barnes Group (B) to Gain From Strong End Markets Amid Risks

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On Jan 10, we issued an updated research report on Barnes Group, Inc. (B - Free Report) .

Over the past six months, this Zacks Rank #3 (Hold) stock has returned 18.9% compared with the industry’s growth of 9.6%.


Existing Scenario

Barnes Group has been benefiting from robust original equipment manufacturer (OEM) sales and solid aerospace aftermarket business on account of higher demand for MRO and spare parts. Supported by a healthy backlog level at the OEM business, management expects its sales to grow in high single digits to low double digits for 2019. In addition, in the company’s aftermarket business, it expects MRO sales to grow in low double-digits range compared with mid to high single-digits rise predicted earlier.

The company has been strengthening business through addition of assets. For instance, its acquisition of Industrial Gas Springs Group (“IGS”) in July 2018 and Gimatics in October 2018 are worth mentioning. Notably, IGS and Gimatics together contributed $13.6 million or 6% to Industrial segment’s revenues in third-quarter 2019. The company expects acquisitions to boost total revenues by approximately 4% in 2019.

However, weakness in the company’s Industrial segment remains a concern. Notably, softness in the automotive end market on account of slowing global economies and trade uncertainties are hurting the segment.

In addition, the company is currently dealing with rising cost of sales. For instance, in the last five years (2014-2018), its cost of sales increased 3% year over year (CAGR). The metric recorded an increase of 0.8% in the first nine months of 2019, on a year-over-year basis. Also, the company’s selling, general and administrative expenses increased 3.5% over the same time frame.

Stocks to Consider

Some better-ranked stocks from the same space are DXP Enterprises, Inc. (DXPE - Free Report) , Chart Industries, Inc. (GTLS - Free Report) and IDEX Corporation (IEX - Free Report) . While DXP Enterprises sports a Zacks Rank #1 (Strong Buy), Chart Industries and IDEX carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DXP Enterprises surpassed earnings estimates thrice in the preceding four quarters, the beat being 17.67%, on average.

Chart Industries outpaced estimates twice in the trailing four quarters, the beat being 4.01%, on average.

IDEX delivered average positive earnings surprise of 3.26% in the trailing four quarters.

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Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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