Let’s dig into the relative performance of Timken (NYSE: TKR) and its peers as we unravel the now-completed Q2 engineered components and systems earnings season.
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 mixed Q2. As a group, revenues along with next quarter’s revenue guidance were in line with analysts’ consensus estimates.
In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.
Timken (NYSE: TKR)
Established after the founder noticed the difficulty freight wagons had making sharp turns, Timken (NYSE: TKR) is a provider of industrial parts used across various sectors.
Timken reported revenues of $1.17 billion, flat year on year. This print exceeded analysts’ expectations by 2.3%. Overall, it was a satisfactory quarter for the company with an impressive beat of analysts’ revenue estimates but full-year EPS guidance missing analysts’ expectations.
"Timken delivered second-quarter results that were largely in line with expectations, as our team continues to manage through this period of elevated uncertainty," said Richard G. Kyle, president and chief executive officer.
Unsurprisingly, the stock is down 9.2% since reporting and currently trades at $73.51.
Is now the time to buy Timken? Access our full analysis of the earnings results here, it’s free for active Edge members.
Best Q2: 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 $7.58 billion, up 10% year on year, outperforming analysts’ expectations by 5.9%. The business had an exceptional quarter with a solid beat of analysts’ revenue estimates.
Arrow Electronics pulled off the biggest analyst estimates beat among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 9.6% since reporting. It currently trades at $117.48.
Is now the time to buy Arrow Electronics? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q2: ESCO (NYSE: ESE)
A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE: ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.
ESCO reported revenues of $296.3 million, up 13.6% year on year, falling short of analysts’ expectations by 7%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations significantly and full-year EPS guidance missing analysts’ expectations significantly.
ESCO delivered the weakest performance against analyst estimates in the group. Interestingly, the stock is up 12.5% since the results and currently trades at $214.06.
Read our full analysis of ESCO’s results here.
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 $55.49 million, up 11.1% year on year. This print came in 1.9% below analysts' expectations. Aside from that, it was a satisfactory quarter as it also produced a beat of analysts’ EPS estimates but a miss of analysts’ revenue estimates.
The stock is up 9.7% since reporting and currently trades at $63.05.
Read our full, actionable report on Graham Corporation here, it’s free for active Edge members.
Applied Industrial (NYSE: AIT)
Formerly called The Ohio Ball Bearing Company, Applied Industrial (NYSE: AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries.
Applied Industrial reported revenues of $1.22 billion, up 5.5% year on year. This number surpassed analysts’ expectations by 3.5%. It was a strong quarter as it also logged an impressive beat of analysts’ organic revenue estimates and a solid beat of analysts’ revenue estimates.
The stock is down 10.1% since reporting and currently trades at $247.97.
Read our full, actionable report on Applied Industrial here, it’s free for active Edge members.
Market Update
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
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