Timken (TKR) Surpasses Q1 Earnings Predictions, Optimistically Adjusts 2024 Financial Outlook

• The Timken Company reports Q1 2024 earnings, with adjusted EPS of $1.77, surpassing the Zacks Consensus Estimate of $1.50.
• Despite beating estimates, the company’s bottom line declined 15% YoY due to low volumes.
• Total revenues were $1.19 billion, down 5.7% from Q1 2023, attributed to low demand and unfavorable foreign currency translation.

Timken Company reports Q1 2024 earnings, beating estimates but witnessing a YoY decline. The company’s revenues also saw a dip due to low demand and unfavorable foreign currency translation.

Timken’s Q1 2024 Earnings Overview

The Timken Company reported an adjusted EPS of $1.77 in Q1 2024, beating the Zacks Consensus Estimate of $1.50. However, the bottom line declined 15% YoY from the record EPS of $2.09 in Q1 2023, as low volumes offset the impacts of favorable price realization. Total revenues were $1.19 billion, down 5.7% from the record revenues of $1.26 billion in Q1 2023. The decline was attributed to low demand, particularly in renewable energy in China, and unfavorable foreign currency translation, partially offset by the benefit of acquisitions and favorable pricing.

Costs, Margins, and Segment Performances

The cost of sales declined 6.3% to $792.7 million from the prior-year quarter. Gross profit was down 5.6% YoY to $397.6 million. The gross margin was 33.4% compared with 30% in Q1 2023. Selling, general and administrative expenses rose 2% YoY to $190.7 million. Adjusted EBITDA decreased 7.2% YoY to $246 million. The adjusted EBITDA margin in the quarter was 20.7% compared with 21% in the prior-year quarter.

Segment Performances

The Engineered Bearings segment’s revenues declined 10.9% YoY to $802.5 million. The decrease was mainly due to weak demand and unfavorable foreign currency translation, offset by higher pricing. The Industrial Motion segment’s revenues rose 7% YoY to $389 million. The upside was led by higher pricing and the benefits of acquisitions, partially offset by lower volume.

Cash Flow & Balance Sheet Updates

Timken had cash and cash equivalents of $422 million at the end of Q1 2024, up from $419 million at the end of 2023. Cash flow from operating activities was $49 million compared with $79 million in the prior-year quarter. The long-term debt as of Mar 31, 2024, was around $1.8 billion, flat compared with the figure as of Dec 31, 2022. Net debt to adjusted EBITDA was 2.1 as of Mar 31, 2024.

2024 Guidance

Timken expects total revenues to decline 2-4% from the 2023 reported level. The company now anticipates adjusted EPS between $6.00 and $6.30, higher than the prior stated range of $5.80 to $6.20. The raised guidance reflects the first-quarter performance and expected improvement across multiple end-market sectors through the remaining part of the year.

Conclusion

Despite the YoY decline in Q1 2024, Timken Company managed to beat estimates. The company’s revenues also saw a dip due to low demand and unfavorable foreign currency translation. However, with the raised guidance for 2024, the company expects improvement across multiple end-market sectors, which could potentially drive growth in the coming quarters.