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Why Is JBT (JBT) Up 12.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for John Bean (JBT - Free Report) . Shares have added about 12.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is JBT 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.

John Bean Beats on Q1 Earnings, Withdraws '20 View

John Bean reported adjusted earnings of $1.01 per share in first-quarter 2020, surpassing the Zacks Consensus Estimate of 73 cents. The bottom line also improved 31% from 77 cents reported in the prior-year quarter. Further, the figure came above management’s guidance of 75-80 cents. The better-than-expected earnings growth came on the back of higher revenues, favorable mix, and cost control measures.

On a reported basis, the company’s earnings per share came in at 90 cents compared with the prior-year quarter’s 62 cents.

The company’s revenues of $458 million in the reported quarter beat the Zacks Consensus Estimate of $424 million. Also, the top line improved 10% year over year. Organic growth of 3% and acquisition growth of 8% were offset by an unfavorable impact of foreign exchange of 1%.

Orders in the JBT FoodTech segment increased 2% year on year to $316 million in the reported quarter. Orders in the JBT AeroTech segment totaled $155 million, reflecting year-over-year growth of 1.2%. Backlog in the FoodTech segment declined 7% year over year to $395 million. The AeroTech segment’s backlog came in at $310 million in the reported quarter, down 8% from the prior-year quarter.

Cost and Margins

Cost of sales increased 9% year over year to $315 million in the first quarter of 2020. Gross profit improved 12% year over year to $143 million. Gross margin came in at 31.2% compared with the year-earlier quarter’s 30.6%.

Selling, general and administrative expenses flared up 6% year over year to $97 million. Adjusted operating profit improved 32% year over year to $48.2 million. Adjusted operating margin was 10.5% compared with prior-year quarter’s 8.8%.  In the reported quarter, adjusted EBITDA came in at $65.7 million, up 28% year over year.

Segment Performance

JBT FoodTech: Net sales were up 5% year over year to $310 million. Adjusted operating profit came in at $41 million, up 4% from the prior-year quarter.

JBT AeroTech: Net sales improved 20% year over year to $148 million. The segment reported adjusted operating profit of $18.5 million, up 78% year over year.

Financial Performance

John Bean reported cash and cash equivalents of $75.4 million at the end of first-quarter 2020, up from $39.5 million at the end of fiscal 2019. The company generated around $14 million of cash from operating activities during first-quarter 2020 compared with the $2 million reported in the prior-year quarter. At the end of first-quarter 2020, long-term debt was $734 million, up from $698 million as of Dec 31, 2019.

Guidance

While the company has witnessed steep declines in demand from restaurants in the FoodTech end segment, packaged food, meat and staples in retail have significant demand. Some AeroTech end markets have been severely impacted by a decline in global passenger air travel. Resilience in infrastructure, cargo and military end markets helped offset this impact. All end markets are facing unprecedented challenges of operating in an environment with governmental restrictions and shutdowns. All of these factors have led to constrained spending by customers.

For second-quarter 2020, JBT Technologies anticipates a 10-15% sequential decline in revenues. The FoodTech segment’s revenues are expected to decrease 5%, while the AeroTech segment’s revenues will plunge 30%. While operating results in both segments will benefit from cost reductions, the anticipated revenue decline at AeroTech will lead to significant margin contraction. FoodTech operating margins might remain flat sequentially.

The company has withdrawn full-year 2020 guidance on account of the COVID-19 uncertainties.

Meanwhile, the company is aligning its cost structure with market conditions. This includes a hiring freeze, reductions in executive compensation, incentive compensation, and work hours; temporary leaves and, where necessary, layoffs. It is also cutting down on discretionary spending.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -23.05% due to these changes.

VGM Scores

Currently, JBT has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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. It's no surprise JBT has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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