Barnes Group (B) Q2 2024 earnings summary

Executive summary

• Q2 2024 sales rose 13% year-over-year to $382M, driven by strong Aerospace growth and the MB Aerospace acquisition, while portfolio transformation advanced with the divestiture of Associated Spring and Hänggi, generating $150M–$146M in net proceeds used to reduce debt.

• Operating margin was -0.6% due to a $53.7M goodwill impairment in Automation; adjusted operating margin was 12.4%, down 40 bps.

• Adjusted EBITDA margin improved to 20.0%, up 20 bps; adjusted EPS was $0.37, down 36% year-over-year due to higher interest expense and divestiture impacts.

• Net loss for Q2 2024 was $46.8M, or -$0.91 per share, compared to net income of $17.4M in Q2 2023, primarily due to the impairment charge.

• Restructuring and transformation initiatives are on track, targeting $38M run-rate savings by end of 2024 and $42M by 2025.

Financial highlights

• Q2 2024 revenue was $382M, up 13% reported and 5% organic year-over-year; adjusted EBITDA grew 14% to $76M with a 20% margin.

• Adjusted operating income was $48M, up 9%, with an adjusted operating margin of 12.4%; adjusted net income per share was $0.37, down from $0.58 a year ago.

• Interest expense rose to $20.8M from $6.5M due to higher borrowings and rates post-acquisition.

• Free cash flow year-to-date was negative $14.5M after adjusting for divestiture-related tax payments.

• Gross margin for Q2 2024 was 32.5%, down from 33.7% year-over-year; selling and administrative expenses down 6.4% year-over-year.

Outlook and guidance

• 2024 total sales growth guidance is 10%–12%, with organic sales growth of 4%–6%.

• Aerospace sales expected to grow ~50% (including MB Aerospace), with low double-digit organic growth; Industrial sales expected to decline mid-teens due to divestitures, but low single-digit organic growth anticipated.

• Adjusted operating margin guidance for the company is 12%–14%; adjusted EBITDA margin 20%–22%; aerospace margin raised to 15.5%–16.5%.

• Adjusted EPS guidance is $1.55–$1.75; adjusted free cash flow $45M–$55M; CapEx $55M–$65M; tax rate 33%–34%.

• Leverage ratio target of 3.0x or lower by year-end 2024, with a long-term goal of 2.5x by 2025.