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Barnes Group (B) Tops Q4 Earnings & Revenues, '18 View Solid

Barnes Group Inc. B reported better-than-expected bottom line results for the fourth quarter of 2017, pulling off a positive earnings surprise of 4.41%.

Adjusted earnings in the quarter came in 71 cents per share, beating the Zacks Consensus Estimate of 68 cents. Also, the bottom line increased roughly 6% over the year-ago tally of 67 cents.

The adjusted results exclude charges of roughly 2 cents related to restructuring actions and $1.79 related to the U.S. tax reform.

For 2017, the company’s adjusted earnings were $2.88 per share, increasing 13.8% year over year.

Organic Growth and Forex Gains Drive Revenues

In the quarter, Barnes’ net sales grew 15.1% year over year to $373 million. The improvement was driven by 10% gain from organic sales growth, 1% benefits from acquired assets and 4% positive impact from foreign currency movements.

Also, the top line surpassed the Zacks Consensus Estimate of $361 million by roughly 3.3%.

Barnes Group reports its revenues under the segments discussed below:

Revenues from the Industrial segment were $254.3 million, increasing 17.9% year over year. The results improved on the back of 11% organic sales growth, 1% gain from acquired assets and 6% positive impact from foreign currency translations.

Businesses were strong in Nitrogen Gas Products, Engineered Components and Molding Solutions units.

Revenues from the Aerospace segment totaled $118.7 million, rising 9.4% year over year. The improvement came on the back of 6% growth in sales derived from original equipment manufacturing and from 17% growth in sales resulting from maintenance, repair and overhaul activities as well as sales from the spare parts business.

Backlog at the quarter-end was $714 million, increasing 14% growth over the year-ago quarter.

For 2017, the company’s net sales were $1,436.5 million, up 16.7% year over year.

Margins Fall on Higher Costs and Expenses

In the quarter, Barnes’ cost of sales jumped 18.6% year over year, representing 66.2% of net sales compared with 64.2% in the year-ago quarter. Selling and administrative expenses, roughly 20.5% of the net sales, increased 18.6% year over year.

Adjusted operating income decreased 1.5% year over year to $51 million while margin slipped 230 basis points to 13.7%.

Balance Sheet and Cash Flow

Exiting the fourth quarter, Barnes had cash and cash equivalents of $145.3 million, above $134.5 million at the previous quarter-end. Long-term debt balance increased 5.7% sequentially to $525.6 million.

In 2017, the company generated net cash of $203.9 million from its operating activities, decreasing 6.3% year over year. Capital spending totaled $58.7 million, up 23.4% year over year. Free cash flow for the year was $145.2 million, with an adjusted conversion ratio of 93%.

During the year, the company paid dividend totaling $29.6 million and repurchased shares worth $40.8 million.


For 2018, Barnes anticipates gaining from a solid product portfolio, a focus on innovating new products and providing better services, strengthening end markets and initiatives directed to enhance operational efficiency.

Earnings per share are anticipated to be within the $2.98-$3.13 range, reflecting year-over-year growth of 3-9%. Total revenues will grow within the 4-6% range, including organic revenue growth of 3-5% and forex gains of roughly 1%. Operating margin will be 15.5-16.5% and effective tax rate will be 25-26%.

Capital expenditures are predicted to be around $60-$65 million.

Barnes Group, Inc. Price, Consensus and EPS Surprise

Barnes Group, Inc. Price, Consensus and EPS Surprise | Barnes Group, Inc. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of approximately $3.4 billion, Barnes carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are Applied Industrial Technologies, Inc. AIT, Dover Corporation DOV and Roper Technologies, Inc. ROP. All these stocks sport a Zacks Rank #1(Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Industrial Technologies has pulled off an average positive earnings surprise of 10.97% over the last four quarters. Also, earnings estimates for fiscal 2018 (ending June 2018) and fiscal 2019 (ending June 2019) have been revised upward over the last 60 days.

Dover Corporation has delivered an average positive earnings surprise of 7.26% in the trailing four quarters. Also, bottom-line expectations for 2018 and 2019 have improved over the past 60 days.

Roper Technologies’ financial performance was impressive, with an average positive earnings surprise of 3.12% in the last four quarters. Also, earnings estimates for 2018 and 2019 have been revised upward over the last 60 days.

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