What happened
Ball bearings and industrial motion equipment manufacturer Timken (TKR 2.25%) missed analyst expectations for the quarter and cut full-year guidance. Investors are disappointed, sending Timken shares down 12% on Thursday morning.
So what
Timken is a world-class operator, but most of its end markets are cyclical, and there is only so much a company can do if its customers are retrenching.
The company earned $2.01 per share in the second quarter on revenue of $1.27 billion, falling short of analysts' expectations for $2.08 per share in earnings on sales of $1.3 billion. That sales figure was up 10% year over year and marked a company record, but was dinged by unfavorable foreign currency exchange rates.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter were $263.0 million, or 20.7% of sales, compared with $231.2 million, or 20% of sales, in the same three months of 2022.
"Timken delivered strong results in the second quarter, achieving double-digit sales and earnings growth and year-over-year margin expansion," CEO Richard G. Kyle said in a statement. "Our performance reflects improved operational execution across the enterprise and the continued positive impact of our strategic growth and capital allocation initiatives."
NYSE: TKR
Key Data Points
Now what
Timken cut its full-year earnings view to $6.90 to $7.30 per share, from $7 to $7.50 per share, to reflect "current order trends and continued near-term economic uncertainty," according to Kyle.
These forecasts would mean new single-year records for the company but aren't quite what they could have been absent macro headwinds including the strong U.S. dollar, uncertainty caused by inflation and higher interest rates, and lingering fears about a recession.
Shares of Timken had been up more than 30% year to date coming into earnings season.
For long-term holders able to look past near-term trends, there is a lot to like. But Timken won't quite be able to deliver as it had hoped in the months to come, and that is taking the momentum out of the stock.
