As the Q3 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the engineered components and systems industry, including Gates Industrial Corporation (NYSE:GTES) and its peers.
Engineered components and systems companies possess technical know-how in sometimes narrow areas such as metal forming or intelligent robotics. Lately, automation and connected equipment collecting analyzable data have been trending, creating new demand. On the other hand, like the broader industrials sector, engineered components and systems companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
The 13 engineered components and systems stocks we track reported a slower Q3. As a group, revenues missed analysts’ consensus estimates by 2% while next quarter’s revenue guidance was 1.9% below.
Thankfully, share prices of the companies have been resilient as they are up 5.5% on average since the latest earnings results.
Gates Industrial Corporation (NYSE:GTES)
Helping create one of the most memorable moments for the iconic “Jurassic Park” film, Gates (NYSE:GTES) offers power transmission and fluid transfer equipment for various industries.
Gates Industrial Corporation reported revenues of $830.7 million, down 4.8% year on year. This print was in line with analysts’ expectations, and overall, it was a satisfactory quarter for the company with an impressive beat of analysts’ EBITDA estimates.
Ivo Jurek, Gates Industrial's Chief Executive Officer, commented, "In the third quarter, our teams executed well and generated over 100 basis points of gross margin improvement in an uneven end market environment. We continue to progress our enterprise initiatives and improve our balance sheet while opportunistically returning capital to our shareholders. "
Interestingly, the stock is up 21.3% since reporting and currently trades at $22.16.
Is now the time to buy Gates Industrial Corporation? Access our full analysis of the earnings results here, it’s free.
Best Q3: Graham Corporation (NYSE:GHM)
Founded when its founder patented a unique design for a vacuum system used in the sugar refining process, Graham (NYSE:GHM) provides vacuum and heat transfer equipment for the energy, petrochemical, refining, and chemical sectors.
Graham Corporation reported revenues of $53.56 million, up 18.8% year on year, outperforming analysts’ expectations by 7.8%. The business had an exceptional quarter with a solid beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.
Graham Corporation delivered the biggest analyst estimates beat, fastest revenue growth, and highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 29.9% since reporting. It currently trades at $43.20.
Is now the time to buy Graham Corporation? Access our full analysis of the earnings results here, it’s free.
Weakest Q3: Worthington (NYSE:WOR)
Founded by a steel salesman, Worthington (NYSE:WOR) specializes in steel processing, pressure cylinders, and engineered cabs for commercial markets.
Worthington reported revenues of $257.3 million, down 17.5% year on year, falling short of analysts’ expectations by 13.1%. It was a disappointing quarter as it posted a significant miss of analysts’ adjusted operating income estimates.
Worthington delivered the slowest revenue growth in the group. As expected, the stock is down 12.1% since the results and currently trades at $39.79.
Read our full analysis of Worthington’s results here.
Arrow Electronics (NYSE:ARW)
Founded as a single retail store, Arrow Electronics (NYSE:ARW) provides electronic components and enterprise computing solutions to businesses globally.
Arrow Electronics reported revenues of $6.82 billion, down 14.8% year on year. This number surpassed analysts’ expectations by 1.4%. However, it was a slower quarter as it recorded a significant miss of analysts’ adjusted operating income estimates.
The stock is down 12.4% since reporting and currently trades at $119.11.
Read our full, actionable report on Arrow Electronics here, it’s free.
NN (NASDAQ:NNBR)
Formerly known as Nuturn, NN (NASDAQ:NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.
NN reported revenues of $113.6 million, down 8.7% year on year. This result came in 5.7% below analysts' expectations. Overall, it was a softer quarter as it also logged a significant miss of analysts’ EBITDA and EPS estimates.
The stock is flat since reporting and currently trades at $3.91.
Read our full, actionable report on NN here, it’s free.
Market Update
As a result of the Fed's rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed's 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump's victory in the US Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain. Said differently, there's still much uncertainty around 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Hidden Gem Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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