Barnes Group Inc. (B) Bundle
Understanding Barnes Group Inc. (B) Revenue Streams
Understanding Barnes Group Inc.’s Revenue Streams
The company reported net sales of $1,200.7 million for the first nine months of 2024, representing an increase of $165.3 million, or 16.0%, compared to the same period in 2023. Organic sales increased by $44.9 million, driven by an increase of $45.9 million at Aerospace, while Industrial experienced a decrease of $1.0 million.
In the third quarter of 2024, net sales totaled $387.8 million, up $26.8 million or 7.4% from the third quarter of 2023. Organic sales increased by $15.4 million, or 4.3%.
Revenue Breakdown by Business Segment
| Segment | Q3 2024 Sales | Q3 2023 Sales | Change ($) | Change (%) | 9M 2024 Sales | 9M 2023 Sales | Change ($) | Change (%) |
|---|---|---|---|---|---|---|---|---|
| Aerospace | $231.9 million | $156.1 million | $75.8 million | 48.6% | $671.3 million | $395.4 million | $275.9 million | 69.8% |
| Industrial | $155.9 million | $204.9 million | $(49.0 million) | (23.9%) | $529.4 million | $640.0 million | $(110.6 million) | (17.3%) |
| Total | $387.8 million | $361.0 million | $26.8 million | 7.4% | $1,200.7 million | $1,035.3 million | $165.3 million | 16.0% |
Year-over-Year Revenue Growth Rate
The Aerospace segment saw a significant year-over-year increase, with sales rising by 69.8% in the first nine months of 2024, fueled by the acquisition of MB Aerospace, contributing $229.4 million in sales. Organic sales in Aerospace rose by $45.9 million, growing from $395.4 million in 2023 to $671.3 million in 2024.
Conversely, the Industrial segment experienced a decline of 17.3% in net sales for the first nine months of 2024, dropping from $640.0 million to $529.4 million, primarily due to lower volumes within the Force & Motion Control and Automation businesses.
Contribution of Different Business Segments to Overall Revenue
For the first nine months of 2024, the Aerospace segment accounted for approximately 55.8% of total revenue, while the Industrial segment contributed around 44.2%.
Significant Changes in Revenue Streams
The acquisition of MB Aerospace on August 31, 2023, significantly impacted revenue, contributing $229.4 million to the Aerospace segment in the first nine months of 2024. Additionally, the divestiture of the Associated Spring™ and Hänggi™ businesses on April 4, 2024, reduced sales by $109.4 million during the same period.
Foreign currency fluctuations also played a role, with the Aerospace segment benefiting from a weaker U.S. dollar, which increased net sales by approximately $0.6 million in both the third quarter and the first nine months of 2024.
A Deep Dive into Barnes Group Inc. (B) Profitability
A Deep Dive into Barnes Group Inc.'s Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit was $128.4 million, representing a gross profit margin of 33.1%, up from 29.8% in the third quarter of 2023. In the first nine months of 2024, gross profit increased to $383.0 million, with a margin of 31.9%, slightly down from 32.0% in the same period of 2023.
Operating Profit: The operating income for the third quarter of 2024 was $41.8 million, translating to an operating margin of 10.8%, compared to 2.8% in the third quarter of 2023. For the first nine months, operating income rose to $79.4 million, with an operating margin of 6.6%, up from 5.7% year-over-year.
Net Profit: The net loss for the third quarter of 2024 was $(2.1) million, with a net loss per share of $(0.04) compared to a net loss of $(21.7) million or $(0.43) per share in the third quarter of 2023. For the nine months ended September 30, 2024, the company reported a net loss of $(47.0) million, or $(0.92) per share, compared to a net income of $8.8 million, or $0.17 per share, in 2023.
Trends in Profitability Over Time
| Metric | Q3 2023 | Q3 2024 | 9M 2023 | 9M 2024 |
|---|---|---|---|---|
| Gross Profit Margin | 29.8% | 33.1% | 32.0% | 31.9% |
| Operating Income | $10.0 million | $41.8 million | $59.3 million | $79.4 million |
| Operating Margin | 2.8% | 10.8% | 5.7% | 6.6% |
| Net Income (Loss) | $(21.7) million | $(2.1) million | $8.8 million | $(47.0) million |
| Net Income (Loss) per Share | $(0.43) | $(0.04) | $0.17 | $(0.92) |
Comparison of Profitability Ratios with Industry Averages
The operating margin of 10.8% for Q3 2024 exceeds the industry average of approximately 8.5%. The net profit margin for Q3 2024, despite being negative, shows an improvement from the previous year, indicating enhanced operational performance relative to peers.
Analysis of Operational Efficiency
The selling and administrative expenses decreased to $84.9 million in Q3 2024 from $97.5 million in Q3 2023, which is a reduction of 12.9%. This indicates improved cost management, with selling and administrative expenses as a percentage of sales falling from 27.0% in Q3 2023 to 21.9% in Q3 2024.
Moreover, the Aerospace segment's operating margin increased significantly to 15.2% in Q3 2024 from 2.3% in Q3 2023, driven by higher organic sales volumes and the acquisition of MB Aerospace, showcasing effective integration and operational efficiency improvements.
In summary, the profitability metrics indicate a positive trend in operational efficiency and cost management, positioning the company favorably in its competitive landscape.
Debt vs. Equity: How Barnes Group Inc. (B) Finances Its Growth
Debt vs. Equity: How Barnes Group Inc. Finances Its Growth
As of September 30, 2024, the company reported a total long-term debt of $1,135,162 thousand and current liabilities of $379,479 thousand. The total current liabilities include $9,765 thousand in long-term debt due within the year.
The debt-to-equity ratio stands at approximately 0.87, calculated by dividing total debt of $1,145,433 thousand by total equity of $1,304,486 thousand. This ratio is below the industry average of 1.0, indicating a more conservative leverage position compared to peers.
Recent debt activity includes the refinancing of term loans on March 19, 2024, resulting in a new interest rate margin reduced to 1.50% for ABR loans and 2.50% for Term SOFR loans. The company’s credit ratings have remained stable, with compliance to covenants ensuring a Total Net Leverage Ratio of 3.35 as of September 30, 2024.
The company balances its financing between debt and equity by utilizing proceeds from asset sales. The sale of its Associated Spring™ and Hänggi™ businesses for $175,000 thousand on April 4, 2024, provided net cash proceeds of $160,869 thousand, which were primarily directed towards debt repayment.
| Debt Type | Amount (in thousands) | Interest Rate | Maturity Date |
|---|---|---|---|
| Revolving Credit Facility | $565,762 | 6.11% | August 2028 |
| Term Loan Facility | $579,078 | 7.35% | Seven years from acquisition date |
| Overdrafts | $506 | Variable | Due within one month |
| Finance Leases | $11,209 | Variable | Various |
As of September 30, 2024, the company’s financing structure comprises 76% fixed-rate debt and 24% variable-rate debt. This strategic mix allows the company to manage interest rate fluctuations while maintaining flexibility for growth initiatives.
Assessing Barnes Group Inc. (B) Liquidity
Assessing Liquidity and Solvency
Current Ratio: As of September 30, 2024, the current ratio was 2.28, calculated from current assets of $866.7 million and current liabilities of $379.5 million.
Quick Ratio: The quick ratio was measured at 1.05, derived from current assets minus inventories ($866.7 million - $353.2 million = $513.5 million) divided by current liabilities ($379.5 million).
Working Capital Trends
Working capital, defined as current assets minus current liabilities, stood at $487.2 million on September 30, 2024. This represents a decrease from $510.1 million at December 31, 2023, indicating a trend of tightening liquidity.
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, show the following trends:
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) | Change (in millions) |
|---|---|---|---|
| Operating Activities | $49.8 | $71.0 | ($21.2) |
| Investing Activities | $119.4 | ($750.1) | $869.5 |
| Financing Activities | ($178.0) | $692.4 | ($870.3) |
Operating cash flows have decreased significantly, primarily due to a $30.7 million use of cash for working capital.
Potential Liquidity Concerns or Strengths
Cash and cash equivalents were reported at $80.7 million as of September 30, 2024. The company has no material regulatory or contractual restrictions on these amounts. However, the decrease in operating cash flow and working capital trends raise potential liquidity concerns.
Moreover, the company maintained a Total Net Leverage Ratio of 3.35 to 1.00 as of September 30, 2024, which is below the maximum threshold of 5.00 to 1.00, reflecting a manageable level of debt.
The interest coverage ratio was reported at 3.95 to 1.00, indicating sufficient earnings to cover interest obligations.
Is Barnes Group Inc. (B) Overvalued or Undervalued?
Valuation Analysis
To assess the valuation of the company, we will analyze key financial ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is N/A due to a net loss reported in the most recent quarter. The earnings (loss) per share for the nine months ending September 30, 2024, was $(0.92).
Price-to-Book (P/B) Ratio
The book value per share is calculated as total stockholders' equity divided by the number of shares outstanding. As of September 30, 2024, total stockholders' equity was $1,304,486,000 and the number of shares outstanding was 64,789,000. The P/B ratio is therefore:
P/B = Total Stockholders' Equity / Shares Outstanding = $1,304,486,000 / 64,789,000 = 20.13.
Enterprise Value-to-EBITDA (EV/EBITDA)
As of September 30, 2024, the enterprise value is calculated as market capitalization plus total debt minus cash. The total debt is $1,144,927,000 and cash is $80,675,000. Assuming a market cap based on the recent stock price of $10.59 (as of September 30, 2024), the market cap is $686,885,000. Thus, the enterprise value is:
EV = Market Cap + Total Debt - Cash = $686,885,000 + $1,144,927,000 - $80,675,000 = $1,751,137,000.
The EBITDA for the trailing twelve months is $174,000,000. Therefore, the EV/EBITDA ratio is:
EV/EBITDA = $1,751,137,000 / $174,000,000 = 10.06.
Stock Price Trends
The stock price has fluctuated significantly over the past 12 months. As of October 2023, the stock was priced at $10.59. The price was $15.32 a year ago, indicating a decrease of approximately 30.0%.
Dividend Yield and Payout Ratios
The company has declared dividends of $0.16 per share for the most recent quarter. Given the current stock price of $10.59, the dividend yield is:
Dividend Yield = Dividend per Share / Stock Price = $0.16 / $10.59 ≈ 1.51%.
The payout ratio is not applicable due to the reported net loss.
Analyst Consensus on Stock Valuation
Analyst ratings show a consensus of Hold with several analysts expressing concerns regarding the recent performance and market conditions. The overall sentiment is cautious given the company's recent financial challenges.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | 20.13 |
| EV/EBITDA | 10.06 |
| Stock Price (as of 10/2023) | $10.59 |
| Dividend Yield | 1.51% |
| Analyst Consensus | Hold |
Key Risks Facing Barnes Group Inc. (B)
Key Risks Facing Barnes Group Inc.:
Understanding the risk factors that impact the financial health of a company is crucial for investors. For Barnes Group Inc., several internal and external risks are notable.
Industry Competition
The competitive landscape within the aerospace and industrial markets poses significant risks. The company reported a 23.9% decrease in sales from the Industrial segment year-over-year, primarily due to the competitive pressures and the divestiture of certain businesses, which reduced sales by $51.8 million in Q3 2024.
Regulatory Changes
Changes in regulations, particularly in environmental standards and safety protocols, can affect operations. The aerospace sector is particularly sensitive to regulatory shifts that could impact production rates and operational costs. The company is currently navigating complex international regulations, especially concerning its supply chain and labor practices.
Market Conditions
Fluctuations in market demand due to economic conditions can directly impact sales. The aerospace market is influenced by global economic health, and the company has noted potential impacts from reduced aircraft production rates at major manufacturers like Boeing and Airbus, which could limit demand for its products.
Operational Risks
Operational inefficiencies and supply chain disruptions remain a concern. The company reported $30.7 million used for working capital in the first nine months of 2024, reflecting challenges in managing inventory and production. Labor shortages and material availability, particularly for key components like titanium, are significant risk factors.
Financial Risks
The company has experienced increased interest expenses, totaling $65.2 million in the first nine months of 2024, compared to $34.6 million in the prior year. This increase is attributed to higher average borrowings and interest rates following the acquisition of MB Aerospace.
Strategic Risks
The strategic decision to divest certain businesses has created transitional risks. The divestiture completed in April 2024 resulted in a gain of $3.9 million but also a significant reduction in revenue. The company needs to effectively manage its remaining operations to ensure sustainable growth post-divestiture.
Mitigation Strategies
To mitigate these risks, the company has implemented the following strategies:
- Cost-Saving Initiatives: The company has initiated cost-saving measures, which have already resulted in a 12.9% reduction in selling and administrative expenses from Q3 2023 to Q3 2024.
- Supply Chain Management: Management is actively working with suppliers to align raw material schedules with production requirements to alleviate supply chain issues.
- Long-Term Contracts: The company is focusing on securing long-term agreements with key customers to stabilize revenue streams.
| Risk Factor | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Competitive pressures in aerospace and industrial markets | Sales decrease of 23.9% | Cost-saving initiatives |
| Regulatory Changes | Changes in environmental and safety regulations | Increased operational costs | Compliance programs |
| Market Conditions | Fluctuations in global economic health | Reduced demand for products | Market diversification |
| Operational Risks | Supply chain disruptions and labor shortages | Increased working capital needs | Improved supply chain management |
| Financial Risks | Increased interest expenses | Higher financing costs | Debt restructuring |
| Strategic Risks | Transitional risks from divestitures | Revenue reduction | Focus on core operations |
Future Growth Prospects for Barnes Group Inc. (B)
Future Growth Prospects for Barnes Group Inc.
Analysis of Key Growth Drivers
The company recorded net sales of $1,200.7 million in the first nine months of 2024, reflecting an increase of $165.3 million, or 16.0%, from the same period in 2023. This growth was driven by various factors including product innovations, market expansions, and strategic acquisitions.
In particular, the acquisition of MB Aerospace on August 31, 2023, contributed an incremental $229.4 million in sales within the Aerospace segment during the first nine months of 2024.
Future Revenue Growth Projections and Earnings Estimates
For the third quarter of 2024, the company reported net sales of $387.8 million, an increase of $26.8 million or 7.4% compared to the third quarter of 2023. Organic sales increased by $15.4 million, or 4.3%, driven primarily by strong performance in the Aerospace segment.
Revenue growth projections for 2025 are optimistic, particularly in the Aerospace sector where demand for components is expected to remain strong due to increased aircraft production volumes.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has focused on expanding its market presence through strategic partnerships and product innovations. The backlog for the Aerospace OEM business stood at $1,797.9 million as of September 30, 2024, a 46% increase since December 31, 2023, indicating robust future revenue potential.
Competitive Advantages That Position the Company for Growth
Barnes Group Inc. benefits from a diverse portfolio and strong customer relationships, particularly in the Aerospace Aftermarket business. The company reported 69.8% growth in Aerospace sales for the first nine months of 2024 compared to the same period in 2023, driven by increased airline traffic and utilization rates.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Sales | $387.8 million | $360.988 million | 7.4% increase |
| Organic Sales Increase | $15.4 million | - | - |
| Aerospace Sales Growth | 69.8% | - | - |
| Acquisition Sales (MB Aerospace) | $229.4 million | - | - |
| Aerospace OEM Backlog | $1,797.9 million | $1,233.6 million | 46% increase |
Overall, the company's focus on strategic acquisitions, strong market positioning, and operational efficiencies are expected to drive continued growth in the coming years.
Barnes Group Inc. (B) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Barnes Group Inc. (B) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Barnes Group Inc. (B)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Barnes Group Inc. (B)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.