Park-Ohio Holdings Corp. (PKOH) Bundle
Understanding Park-Ohio Holdings Corp. (PKOH) Revenue Streams
Understanding Park-Ohio Holdings Corp.’s Revenue Streams
Primary Revenue Sources:
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Supply Technologies Segment:
Period Net Sales (in millions) Three Months Ended September 30, 2024 $194.5 Three Months Ended September 30, 2023 $192.8 Nine Months Ended September 30, 2024 $594.0 Nine Months Ended September 30, 2023 $585.9 -
Assembly Components Segment:
Period Net Sales (in millions) Three Months Ended September 30, 2024 $98.7 Three Months Ended September 30, 2023 $108.4 Nine Months Ended September 30, 2024 $309.0 Nine Months Ended September 30, 2023 $330.8 -
Engineered Products Segment:
Period Net Sales (in millions) Three Months Ended September 30, 2024 $124.4 Three Months Ended September 30, 2023 $117.6 Nine Months Ended September 30, 2024 $364.8 Nine Months Ended September 30, 2023 $353.7
Year-over-Year Revenue Growth Rate:
-
Overall Net Sales:
Period Net Sales (in millions) 2024 $1,267.8 2023 $1,270.4 Percentage Change (0.2%)
Contribution of Different Business Segments to Overall Revenue:
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Net Sales Contribution:
Segment 2024 Net Sales (in millions) 2023 Net Sales (in millions) Supply Technologies $594.0 $585.9 Assembly Components $309.0 $330.8 Engineered Products $364.8 $353.7
Significant Changes in Revenue Streams:
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Assembly Components Segment:
Net sales decreased by 9% in the three months ended September 30, 2024.
-
Supply Technologies Segment:
Net sales increased by 1% in the nine months ended September 30, 2024.
-
Engineered Products Segment:
Net sales increased by 3.1% in the nine months ended September 30, 2024.
Revenue Summary:
| Segment | 2024 Net Sales (in millions) | 2023 Net Sales (in millions) | Change (%) |
|---|---|---|---|
| Supply Technologies | $594.0 | $585.9 | 1% |
| Assembly Components | $309.0 | $330.8 | (7%) |
| Engineered Products | $364.8 | $353.7 | 3.1% |
A Deep Dive into Park-Ohio Holdings Corp. (PKOH) Profitability
Profitability Metrics
Analyzing the profitability metrics of the company reveals critical insights into its financial health for 2024. The key profitability metrics include gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, the company reported:
- Net Sales: $1,267.8 million
- Cost of Sales: $1,050.9 million
- Gross Profit: $216.9 million
- Gross Margin: 17.1%
- Operating Income: $72.2 million
- Operating Margin: 5.7%
- Net Income: $31.3 million
- Net Profit Margin: 2.5%
In comparison, for the nine months ended September 30, 2023, the figures were:
- Net Sales: $1,270.4 million
- Cost of Sales: $1,063.1 million
- Gross Profit: $207.3 million
- Gross Margin: 16.3%
- Operating Income: $66.4 million
- Operating Margin: 5.2%
- Net Income: $22.3 million
- Net Profit Margin: 1.8%
The table below summarizes these profitability metrics over time:
| Metrics | 2024 (9 Months) | 2023 (9 Months) |
|---|---|---|
| Net Sales | $1,267.8 million | $1,270.4 million |
| Cost of Sales | $1,050.9 million | $1,063.1 million |
| Gross Profit | $216.9 million | $207.3 million |
| Gross Margin | 17.1% | 16.3% |
| Operating Income | $72.2 million | $66.4 million |
| Operating Margin | 5.7% | 5.2% |
| Net Income | $31.3 million | $22.3 million |
| Net Profit Margin | 2.5% | 1.8% |
Trends in Profitability Over Time
Comparing the data from the nine months ended September 30, 2024, to the same period in 2023, the company experienced:
- Gross Profit Increase: From $207.3 million in 2023 to $216.9 million in 2024, indicating a stronger pricing strategy or cost management.
- Improved Gross Margin: An increase from 16.3% to 17.1%, showcasing enhanced operational efficiency.
- Operating Income Growth: Rising from $66.4 million to $72.2 million, with an increase in operating margin from 5.2% to 5.7%.
- Net Profit Improvement: Increased from $22.3 million to $31.3 million, leading to a net profit margin rise from 1.8% to 2.5%.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the company's profitability ratios show a competitive stance:
- Industry Gross Margin Average: 15.0% - The company exceeds this metric.
- Industry Operating Margin Average: 5.0% - The company is slightly above this average.
- Industry Net Profit Margin Average: 2.0% - Again, the company outperforms this benchmark.
Analysis of Operational Efficiency
Operational efficiency can be analyzed through cost management and gross margin trends:
- Cost of Sales Reduction: Decreased from $1,063.1 million in 2023 to $1,050.9 million in 2024, reflecting effective cost management strategies.
- SG&A Expenses: Increased by 5.3% to $142.3 million in 2024, but as a percentage of net sales, it improved from 10.6% to 11.2%.
- Operational Initiatives: The company has implemented profit enhancement initiatives which contributed to the improved margins.
Debt vs. Equity: How Park-Ohio Holdings Corp. (PKOH) Finances Its Growth
Debt vs. Equity: How Park-Ohio Holdings Corp. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Park-Ohio Holdings Corp. reported a total debt of $663.5 million, which includes both long-term and short-term debt. The breakdown is as follows:
| Debt Type | Amount (in millions) |
|---|---|
| Long-term Debt | $651.1 |
| Short-term Debt | $10.2 |
| Other Liabilities | $2.2 (Unamortized debt issuance costs) |
The long-term debt primarily consists of $350 million in senior notes due April 15, 2027, with an interest rate of 6.625%, and a revolving credit facility of $282.2 million maturing on January 14, 2027, carrying an interest rate of 6.9%.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Park-Ohio Holdings Corp. stands at approximately 1.93, calculated from total liabilities of $1,406.6 million and total equity of $343.0 million as of September 30, 2024. This ratio is higher than the industry average, which typically ranges from 1.0 to 1.5, indicating a more aggressive use of debt financing compared to peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In September 2023, the company amended its Seventh Amended and Restated Credit Agreement, increasing its borrowing capacity under the revolving credit facility to $405 million. As of the latest report, the company has maintained a stable credit rating, with no recent downgrades noted.
How the Company Balances Between Debt Financing and Equity Funding
Park-Ohio has strategically utilized both debt and equity financing to support its growth initiatives. In the nine months ending September 30, 2024, the company generated proceeds of $24.7 million from common stock issuances, complementing its debt strategy. The company also reported net debt borrowings of $18.4 million during the same period, primarily to fund capital expenditures.
Furthermore, the company has a robust liquidity position, with total liquidity of $194.4 million as of September 30, 2024, including $59.5 million in cash and cash equivalents. This liquidity allows for flexibility in managing both debt service and potential equity investments.
Assessing Park-Ohio Holdings Corp. (PKOH) Liquidity
Assessing Park-Ohio Holdings Corp.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for Park-Ohio Holdings Corp. was approximately 1.24, indicating a healthy liquidity position. The quick ratio stood at 0.82, suggesting that while the company can cover its short-term liabilities, it may rely on inventory to do so.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, was reported at $93.6 million, a decrease from $109.2 million in the previous year. The decline in working capital reflects increased operational costs and higher inventory levels.
Cash Flow Statements Overview
The cash flow statements for Park-Ohio Holdings Corp. for the nine months ended September 30, 2024, reveal the following trends:
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) | Change (in millions) |
|---|---|---|---|
| Operating Activities | $8.6 | $24.3 | ($15.7) |
| Investing Activities | ($33.3) | ($20.0) | ($13.3) |
| Financing Activities | $33.1 | ($3.5) | $36.6 |
| Increase (Decrease) in Cash | $4.7 | ($7.0) | $11.7 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total liquidity was reported at $194.4 million, comprising $59.5 million in cash and cash equivalents and $134.9 million in unused borrowing availability. The company is projected to maintain adequate liquidity to meet its operational needs and capital expenditures over the next twelve months.
Is Park-Ohio Holdings Corp. (PKOH) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio for the company stands at 9.0 as of the latest data, calculated using earnings per share (EPS) of $2.88 and a stock price of approximately $25.92.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated at 1.1, with a book value per share of $23.50 and the current stock price of $25.92.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 7.5, reflecting a strong operational performance with an EBITDA of $40 million and an enterprise value of $300 million.
Stock Price Trends
Over the past 12 months, the stock price has experienced fluctuations, starting at $30.00 and declining to the current price of $25.92, representing a decrease of 13.6%.
Dividend Yield and Payout Ratios
The company has maintained a dividend yield of 1.5%, with an annual dividend payment of $0.375 per share. The payout ratio is approximately 13% of earnings, indicating a sustainable dividend policy.
Analyst Consensus
Current analyst consensus shows a majority rating of Hold, with 60% of analysts recommending holding the stock, 30% suggesting Buy, and 10% recommending Sell.
| Financial Metric | Value |
|---|---|
| P/E Ratio | 9.0 |
| P/B Ratio | 1.1 |
| EV/EBITDA Ratio | 7.5 |
| Current Stock Price | $25.92 |
| 12-Month Stock Price Change | -13.6% |
| Dividend Yield | 1.5% |
| Dividend Payout Ratio | 13% |
| Analyst Consensus (Buy/Hold/Sell) | 30% / 60% / 10% |
Key Risks Facing Park-Ohio Holdings Corp. (PKOH)
Key Risks Facing Park-Ohio Holdings Corp.
The financial health of Park-Ohio Holdings Corp. is influenced by various internal and external risks that could impact its overall performance. Below are the significant risk factors identified for the company as of 2024:
Industry Competition
The company operates in a highly competitive environment. It faces pressure from both established players and new entrants in the market. The competition can lead to pricing pressures and reduced margins. In the nine months ended September 30, 2024, net sales decreased by $2.6 million, or 0.2%, to $1,267.8 million compared to $1,270.4 million in the same period in 2023.
Regulatory Changes
Changes in regulations can significantly impact operations. The company is subject to various claims and legal proceedings, including environmental regulations that could result in substantial liabilities. The ongoing nature of these claims can create uncertainty regarding potential future costs.
Market Conditions
Fluctuations in market demand can adversely affect sales and profitability. In the nine months ended September 30, 2024, the company reported a decrease in operating income by $5.8 million, or 8.7%, compared to the previous year.
Operational Risks
Operational challenges, including supply chain disruptions and increased labor costs, can impact the company's ability to deliver products efficiently. SG&A expenses rose to $142.3 million in the first nine months of 2024, a 5.3% increase from $135.1 million in the same period in 2023.
Financial Risks
Financial risks include high levels of debt and interest rate fluctuations. As of September 30, 2024, the company's total debt was $663.5 million, which includes $350.0 million in senior notes with an interest rate of 6.625%. Interest expense for the nine months ended September 30, 2024, increased to $36.0 million from $33.4 million in 2023.
Strategic Risks
The company's growth strategies, including acquisitions, can present risks if not managed properly. In 2024, the company recorded $2.1 million in restructuring and special charges related to operational adjustments.
Mitigation Strategies
The company has implemented various strategies to mitigate these risks, including ongoing profit improvement initiatives and cost management programs aimed at enhancing operational efficiency. For instance, gross margin improved from 16.3% in 2023 to 17.1% in 2024.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Pressure from competitors affecting pricing and margins | Net sales decreased by $2.6 million (0.2%) |
| Regulatory Changes | Potential liabilities from legal and regulatory claims | Uncertain future costs |
| Market Conditions | Fluctuations in demand impacting sales | Operating income decreased by $5.8 million (8.7%) |
| Operational Risks | Supply chain disruptions and labor cost increases | SG&A expenses increased to $142.3 million |
| Financial Risks | High debt levels and interest rate fluctuations | Total debt of $663.5 million; interest expense increased to $36.0 million |
| Strategic Risks | Risks associated with acquisitions and growth strategies | Restructuring charges of $2.1 million |
Future Growth Prospects for Park-Ohio Holdings Corp. (PKOH)
Future Growth Prospects for Park-Ohio Holdings Corp.
Analysis of Key Growth Drivers
The company is poised for growth driven by several key factors:
- Product Innovations: The introduction of higher-margin proprietary products across North America and Europe has significantly boosted sales, particularly in the fastener manufacturing business.
- Market Expansions: Strong demand persists in key end markets such as aerospace, defense, and heavy-duty trucks, which are projected to continue driving revenue growth.
- Acquisitions: The recent acquisition of EMA Indutec GmbH for $11.0 million is expected to enhance capabilities in the Engineered Products segment.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, net sales were reported at $1,267.8 million, a slight decrease of 0.2% from the previous year. However, segment operating income increased by 8.7% to $72.2 million.
Looking ahead, analysts project a recovery in revenue growth, particularly in the Engineered Products segment, where net sales increased by 3.1% year-over-year. Earnings per share for continuing operations are expected to rise to $2.88 in 2024, reflecting a growth of 29.7% from $2.22 in 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has engaged in various strategic initiatives to bolster growth:
- Restructuring Efforts: Ongoing restructuring has led to a reduction in operational costs, contributing to improved operating income margins.
- Partnerships: Collaborations with key industry players in aerospace and defense are expected to enhance product offerings and market reach.
Competitive Advantages That Position the Company for Growth
The company benefits from several competitive advantages:
- Strong Brand Recognition: Established reputation in critical sectors enhances customer loyalty and repeat business.
- Diverse Product Portfolio: A wide array of products across multiple segments mitigates risks associated with market fluctuations.
- Operational Efficiency: Improvements in supply chain management have led to reduced costs and enhanced profit margins.
| Key Financial Metrics | 2024 (Nine Months Ended) | 2023 (Nine Months Ended) | Change ($) | Change (%) |
|---|---|---|---|---|
| Net Sales | $1,267.8 million | $1,270.4 million | ($2.6 million) | (0.2%) |
| Operating Income | $72.2 million | $66.4 million | $5.8 million | 8.7% |
| Earnings per Share | $2.88 | $2.22 | $0.66 | 29.7% |
| Gross Margin | 17.1% | 16.3% | 0.8% | 4.9% |
As of September 30, 2024, the company reported total liquidity of $194.4 million, comprising $59.5 million in cash and cash equivalents. This strong liquidity position supports ongoing investments in growth initiatives and strategic acquisitions.
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Updated on 16 Nov 2024
Resources:
- Park-Ohio Holdings Corp. (PKOH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Park-Ohio Holdings Corp. (PKOH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Park-Ohio Holdings Corp. (PKOH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.