Barnes Group (B) Displays Bright Prospects Amid Headwinds

On Dec 9, we issued an updated research report on Barnes Group, Inc. (NYSE:B) .

Over the past three months, this Zacks Rank #3 (Hold) stock has returned 21.2% compared with the industry’s growth of 6.4%.

Existing Scenario

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

Also, the company has been steadily strengthening business through acquisitions. In this regard, its buyouts of Industrial Gas Springs Group (“IGS”) (July 2018) and Gimatics (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, Barnes Group is experiencing softness in the Industrial segment due to persistent softness in the automotive end market on account of slowing global economies and trade uncertainties. As a matter of fact, the company expects the softness to persist in the rest of 2019 and negatively impact its short cycle businesses like the molding solutions business and force & motion control business.

In addition, high debt level is a headwind for the company. In the last five years (2014-2018), its long-term debt rose 13.6% (CAGR). The metric surged 52.7% to $856.1 million on a year-over-year basis at the end of the third quarter of 2019.

Key Picks

Some better-ranked stocks from the same space are Kaman Corporation (NYSE:KAMN) , Tennant Company (NYSE:TNC) and DXP Enterprises, Inc. (NASDAQ:DXPE) . While Kaman and Tennant sport a Zacks Rank #1 (Strong Buy), DXP Enterprises carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kaman delivered average positive earnings surprise of 7.72% in the trailing four quarters.

Tennant pulled off average positive earnings surprise of 28.65% in the trailing four quarters.

DXP Enterprises delivered average positive earnings surprise of 17.67% in the trailing four quarters.

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