News

Barnes Group Inc. B reported adjusted earnings of 41 cents per share in fourth-quarter 2023, surpassing the Zacks Consensus Estimate of adjusted earnings of 35 cents per share. The bottom line declined 21% year over year due to the increasing cost of sales.

Inside the Headlines

Total revenues of $415.5 million missed the Zacks Consensus Estimate of $420 million. Nevertheless, the top line increased 32.6% year over year, with organic sales growth of 2%.

Barnes reports revenues under two heads, namely Industrial and Aerospace. A brief snapshot of the segmental sales is provided below:
Revenues from the Industrial segment amounted to $203 million, down 1% year over year. While organic sales were down 4% year over year, favorable foreign currency movements increased sales by 3%. Our estimate for segmental revenues was $198.1 million.

The Aerospace segment’s sales totaled $213 million in the fourth quarter, up 96% from the year-ago quarter’s figure. Organic sales increased 15% and acquisition-boosted sales rose 81%. The upside can be attributed to a 109% surge in Aerospace original equipment manufacturing sales and a 77% rise in aftermarket sales. Our estimate for segmental revenues was $220.4 million.

Barnes Group, Inc. Price, Consensus and EPS Surprise

Margin Profile

In the reported quarter, Barnes’ cost of sales increased 44% year over year to $304.4 million. Selling and administrative expenses increased 4.5% to $81.4 million.

Adjusted operating income was $47.7 million, up 36% year over year, while the margin increased 30 basis points to 11.5%.

Balance Sheet & Cash Flow

At the end of the fourth quarter, Barnes had cash and cash equivalents of $89.8 million compared with $76.9 million recorded at the end of 2022. Long-term debt was $1,280 million, up from $569.6 million at the end of 2022.

Liquidity available in the quarter included cash of $90 million and credit under revolving facilities of $357 million.

In 2023, Barnes generated net cash of $112.4 million from operating activities compared with $75.6 million generated in the year-ago period. Capital expenditures totaled $55.7 million, up 58.7% from the year-ago quarter’s figure. Free cash flow was $56.7 million compared with $40.5 million a year ago.

In 2023, Barnes rewarded its shareholders with dividends of $32.4 million, nearly flat year over year.

2024 Outlook

For 2024, Barnes expects total sales to increase in the range of 12-16% year over year and organic sales to grow 4-8%. Adjusted operating margin is estimated to be 12-14%, while the adjusted EBITDA margin is projected to be 20-22%.

GAAP earnings are projected to be $0.94 to $1.19 per share, while the adjusted earnings are expected to be in the band of $1.55-$1.80.

For 2024, Barnes expects capital expenditures of $60-$70 million, while free cash flow is likely to be $75-$85 million. The adjusted effective tax rate is forecasted to be 30-32% for the year.

Zacks Rank & Stocks to Consider

Barnes currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the same space are discussed below:

Parker-Hannifin Corporation PH carries a Zacks Rank #2 (Buy). PH delivered a trailing four-quarter average earnings surprise of 14.4%. In the past 60 days, the Zacks Consensus Estimate for its 2024 earnings has increased 2.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Flowserve Corporation FLS presently has a Zacks Rank of 2. FLS delivered a trailing four-quarter average earnings surprise of 27.3%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2023 earnings has remained steady.

Ingersoll-Rand plc IR presently has a Zacks Rank of 2. IR delivered a trailing four-quarter average earnings surprise of 15.9%. In the past 60 days, the Zacks Consensus Estimate for Ingersoll-Rand’s 2024 earnings has increased 1.6%.

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