Shares of The Timken Company TKR have lost 8% since it reported third-quarter 2024 results on Nov. 5, 2024. TKR reported adjusted earnings per share (EPS) of $1.23 for the quarter, which marked a 20.6% year-over-year decline. The bottom line also missed the Zacks Consensus Estimate of earnings of $1.37. The weaker-than-expected results were led by lower volumes and higher costs. 

On a reported basis, the company delivered earnings of $1.16 per share compared with $1.23 in the prior-year quarter.

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Total revenues were $1.13 billion, down 1.4% from the year-ago quarter. The top line beat the Zacks Consensus Estimate of $1.12 billion.

Timken Reports Margin Contraction

The cost of sales dipped 0.6% to $782 million from the prior-year quarter. The gross profit decreased 3% year over year to $344 million. The gross margin was 30.6% compared with 31.1% in the year-ago quarter.

Selling, general and administrative expenses were up 5.6% year over year to $189.7 million. Operating income fell 2% year over year to $146 million. 

Adjusted EBITDA declined 12% year over year to $190 million. The adjusted EBITDA margin was 16.9%, a 200-basis-point contraction from 18.9% in the prior-year quarter.

Timken’s Segment Performances in Q3

The Engineered Bearings segment’s revenues fell 4.5% year over year to $741 million. This was due to weak end-market demand in Europe and China. Renewable energy witnessed a significant organic decline in the quarter, owing to continued weakness in China. The off-highway, auto/truck and general & heavy industrial sectors also declined, while industrial distribution, aerospace and rail shipments were higher year over year. 

The Engineered Bearings segment’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $138 million compared with the year-ago quarter’s $157 million. The decline was due to lower volume and higher logistics and manufacturing costs, offset by favorable price/mix.

The Industrial Motion segment’s revenues rose 5.2% year over year to $386 million. The increase was aided by acquisitions, offset by lower end-market demand. Organically, the automatic lubrication systems platform posted the largest decline, while drive systems revenues showed improvement. 

The segment’s adjusted EBITDA was $74 million compared with $75 million in the third quarter of 2023. The decline was due to lower volume and higher operating costs, partially offset by the benefits of acquisitions.

TKR’s Cash Flow & Balance Sheet Updates

Timken had cash and cash equivalents of $413 million at the end of the third quarter compared with $419 million at the end of 2023. Cash flow from operating activities was $123 million compared with $194 million in the prior-year quarter. 

The long-term debt as of Sept. 30, 2024, was $2.19 billion, up from $1.79 billion as of Dec. 31, 2023. Net debt to adjusted EBITDA was 2.1 as of the same date, in-line with  the figure as of Dec. 31, 2023.

During the quarter, Timken completed the acquisition of CGI, Inc., a manufacturer of precision drive systems for medical robotics and other automation sectors.

Timken’s 2024 Guidance

Timken expects total revenues to decline 4% from the 2023 level. The company anticipates adjusted EPS to be between $5.55 and $5.65. The midpoint of the range indicates a year-over-year decline of 21%.

TKR Stock’s Price Performance

In the past year, TKR shares have gained 8.5% compared with the industry’s 10.8% growth.

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Timken’s Zacks Rank

Timken currently carries a Zacks Rank #5 (Strong Sell). 

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Recent Earnings Performances of TKR’s Peers

KLA Corporation KLAC reported first-quarter fiscal 2025 (ended Sept. 30, 2024) adjusted earnings of $7.33 per share, which beat the Zacks Consensus Estimate of $7.03. The figure jumped 27.7% year over year.

KLAC’s revenues increased 18.5% year over year to $2.84 billion, surpassing the consensus estimate of $2.76 billion.

Garmin Ltd. GRMN posted third-quarter 2024 EPS of $1.99, which beat the Zacks Consensus Estimate of $1.46. The bottom line marked a 41% year-over-year improvement. 

GRMN posted revenues of $1.59 billion, which beat the consensus estimate of $1.44 billion. The company reported revenues of $1.28 billion in the year-ago quarter.

Carrier Global Corporation CARR reported third-quarter 2024 EPS of 77 cents per share, which missed the Zacks Consensus Estimate of 81 cents. The company had reported earnings of 89 cents per share in the year-ago quarter. 

CARR recorded revenues of $5.98 billion , which missed the consensus estimate of $6.61 billion. The company had reported revenues of $5.73 billion in the year-ago quarter.

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