B - Barnes Group - Barnes Aerospace increased sales by 23%

Barnes Group reports a record quarter as the 151-year old aerospace and industrial company takes advantage of globalization to grow sales. The company has surprised on estimates three out of the last four quarters on average of 7.37%. Barnes Group has a forward P/E of 12.04.

Full Analysis

Barnes Group, Inc. (B) is an international aerospace and industrial components manufacturer and full-service distribution company that was founded in 1857 as a single metal parts shop and has grown to 65 locations around the globe.

The company, a Zacks #1 Rank (Strong Buy), has three business segments: Barnes Aerospace, Barnes Distribution and Barnes Industrial.

Barnes Aerospace produces precision machined and fabricated components and assemblies for original equipment manufacturer turbine, airframe and industrial gas turbine builders.

Barnes Aerospace also provides jet engine component overhaul and repair services for many of the world's commercial airlines and military applications.

Barnes Distribution is a distributor of maintenance, repair, operating and production supplies. It provides a wide variety of high-volume replacement parts and other products, as well as inventory management and logistics services, to a diverse customer base.

Barnes Industrial is an industrial components manufacturer of a broad range of products for an assorted customer base. The Barnes Industrial business segment consists of six divisions: Precision Forming; Retention Rings; Nitrogen Gas Products; Precision Valves; Engineered Springs; and Plastics.

Barnes Reports Record Net Income and Sales for the First Quarter

On May 2, Barnes Group reported first-quarter earnings and surprised on estimates by 7 cents a share, or 13.21%, reporting 60 cents compared to analysts' estimates of 53 cents per share. Net income rose 20.9% to a record $33.4 million compared to $27.7 million in the first quarter 2007.

Sales increased 7.7% to a record $388.6 million from $360.7 million in the year ago period. All three segments saw sales gains for the quarter.

Barnes Aerospace increased sales by 23%, Barnes Distribution was up 1% and Barnes Industrial rose 4% over 2007. Barnes Industrial's sales were favorably impacted by strong local currencies as reported in U.S. dollars.

Globalization is fueling the company's results. Barnes attributed the rise in net income to 8% revenue growth which the company said was driven by strong demand in the international industrial and aerospace manufacturing sectors.

Full-Year Guidance Raised

Given the increase in demand, the company raised earnings forecasts for the year to the range of $2.30 to $2.39 per share from $2.20 to $2.30 per share. Barnes is anticipating an increase of 31% to 36% from 2007's reported results.

Barnes expects the Aerospace segments's operation margins to rise to the range of 20.0% to 21.0%, up from 18.9% in 2007. The recently announced delays of the Boeing 787 Dreamliner have also been considered in the 2008 outlook.

Analysts Raise Estimates for the Second Quarter and 2008

In response to the record first quarter, brokerage analysts raised estimates for the quarter and the full year. Consensus estimates rose two cents in the last week to 61 cents compared to 59 cents per share. For the year, consensus estimates rose to match the company's guidance. Estimates moved up 13 cents to $2.38 from $2.25 per share.

Barnes' 2008 P/E is 12.04. Its price-to-book is 2.26. The company's average five year return on equity (ROE) is a solid 13.58%. In addition, Barnes Group has a dividend yield of 2.00%.

Content Courtesy: Zacks Investment Research

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