Barnes Group Inc. B has failed to impress investors with its recent operational performance due to tough end-market conditions and other challenges, which are likely to adversely impact its earnings.
The Zacks Rank #5 (Strong Sell) company has a market capitalization of nearly $2.5 billion. In the past six months, it has gained 38.8% compared with the industry’s growth of 118%.
Let’s discuss the factors that might continue to take a toll on the firm.
Soft End-Market Conditions: Persistent softness in automotive and industrial end markets on account of the coronavirus outbreak-related issues are likely to continue adversely impacting the company’s Industrial segment. Also, reduced aircraft utilization and lower demand for manufactured components in the aerospace end market remain concerning for the Aerospace segment. The duration of the pandemic and the impacts of the government-imposed travel restrictions are likely to weigh on the company.
High Debt Level: Barnes Group’s high-debt profile poses a concern. In the last five years (2016-2020), its long-term debt increased 8.4% (CAGR). Exiting fourth-quarter 2020, the company’s long-term debt remained high at $699.9 million. Any further increase in debt levels can raise its financial obligations and hurt profitability.
Forex Woes: Given its widespread presence in international markets, Barnes Group is exposed to the unfavorable foreign currency movements. For instance, a stronger U.S. dollar might depress the company’s overseas business results in the quarters ahead.
Estimate Trend: In the past 30 days, analysts have increasingly become bearish on the company, as evident from negative earnings estimate revisions. Notably, the Zacks Consensus Estimate for its 2021 earnings has trended down from $1.92 to $1.80 on three downward estimate revisions against none upward. In addition, over the same timeframe, the consensus estimate for 2022 earnings has trended down from $2.40 to $2.38 on two downward estimate revisions against none upward.
Stocks to Consider
Some better-ranked stocks in the industry are EnPro Industries, Inc. NPO, Applied Industrial Technologies, Inc. AIT and Chart Industries, Inc. GTLS. While EnPro currently sports a Zacks Rank #1 (Strong Buy), both Applied Industrial and Chart Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
EnPro delivered a positive earnings surprise of 310.81%, on average, in the trailing four quarters.
Applied Industrial delivered a positive earnings surprise of 21.92%, on average, in the trailing four quarters.
Chart Industries delivered a positive earnings surprise of 30.80%, on average, in the trailing four quarters.
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