• Revenue: $1.07 billion, down 1.6% year-over-year.
• Organic Revenue Decline: 2.5% decrease.
• Adjusted EBITDA Margin: 16.6%, down 130 basis points from last year.
• Adjusted Earnings Per Share (EPS): $1.16, down 15% from last year.
• Free Cash Flow (Q4): $125 million; $300 million for the full year.
• Net Income: $71 million or $1.01 per diluted share on a GAAP basis.
• Engineered Bearings Sales: $708 million, down 2.3% year-over-year.
• Industrial Motion Sales: $366 million, down slightly from last year.
• 2025 Revenue Guidance: Down 1% to 4% for the full year.
• 2025 Adjusted EPS Guidance: $5.30 to $5.80.
• 2025 Free Cash Flow Guidance: At least $400 million.
• Cost Savings Target for 2025: $75 million.

• Warning! GuruFocus has detected 4 Warning Sign with TKR.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Timken Co (NYSE:TKR) generated $125 million of free cash flow in the fourth quarter, contributing to a total of $300 million for the full year.
• The company expects to deliver around $75 million of incremental cost savings in 2025, which will help offset inflation and currency headwinds.
• Timken's recent acquisitions, CGI and Lagersmit, have performed well, contributing positively to margins.
• The company plans to generate at least $400 million of free cash flow in 2025, reflecting improved working capital and reduced CapEx.
• Timken is prioritizing investments in product lines and services with the highest returns and growth potential, maintaining a disciplined approach to capital allocation.

Negative Points

• Revenue for the fourth quarter was down 1.6% year-over-year, with organic sales decreasing by 2.5%, primarily due to weak demand in Europe.
• Adjusted EBITDA margins decreased to 16.6%, down 130 basis points from the previous year.
• The company anticipates organic sales to be slightly lower in 2025 due to continued weakness in Europe and challenging industrial market conditions.
• Currency impacts are expected to be a significant headwind in 2025, contributing to a modest decline in adjusted EPS.
• The company faces potential tariff impacts from Canada and Mexico, which could pose a short-term headwind if not mitigated effectively.

Q & A Highlights

Q: Can you provide a big picture on the outlook for 2025, considering the recent ISM inflection and distributor activity? A: We are taking a cautious outlook for 2025, primarily due to weak demand in Europe. While the ISM turning positive is encouraging, we are not factoring in a recovery until we see it. We expect Europe to be slightly down, with the rest of the world flat to slightly up. Positive sectors include Aerospace and Services, while Off-Highway and Heavy Industries are expected to be down.

Q: How are you addressing potential tariff impacts, particularly from Mexico and Canada? A: We have a global footprint, with our largest manufacturing base in the U.S., which is a strength. If tariffs are imposed, it would be a short-term headwind, but we expect to mitigate this through pricing, surcharges, and supply chain adjustments, similar to our approach in 2018.

Q: What are your expectations for organic sales in the first half of 2025? A: We anticipate organic sales to decline at a similar rate to the fourth quarter of 2024, with a slightly larger decline in Q1 and a smaller decline in Q2. We expect revenue to be flat to slightly up in the second half of the year.

Q: Can you provide more detail on the $75 million cost savings plan? A: The cost savings are designed to protect margins, with about 40% realized in the first half and 60% in the second half of 2025. The savings are split approximately 80% in COGS and 20% in SG&A, with two-thirds from Bearings and one-third from Industrial Motion.

Q: How are you planning to enhance your product portfolio and customer engagement? A: We aim to become more customer-centric by tailoring products to local needs, especially in the U.S., China, and India. We are also focusing on cross-selling opportunities within our broader portfolio, such as bearings and lubrication solutions, to better meet customer requirements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.