Wrapping up Q2 earnings, we look at the numbers and key takeaways for the engineered components and systems stocks, 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 mixed Q2. As a group, revenues missed analysts’ consensus estimates by 0.9% while next quarter’s revenue guidance was 0.9% below.
Inflation progressed towards the Fed’s 2% goal at the end of 2023, leading to strong stock market performance. On the other hand, 2024 has been a bumpier ride as the market switches between optimism and pessimism around rate cuts and inflation. However, engineered components and systems stocks have held steady amidst all this with share prices up 2.6% 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 $898.6 million, down 4% year on year. This print was in line with analysts’ expectations, but overall, it was a slower quarter for the company with underwhelming EBITDA guidance for the full year and a miss of analysts’ operating margin estimates.
Ivo Jurek, Gates Industrial's Chief Executive Officer, commented, "During the second quarter, we delivered a 270 basis point year-over-year increase in gross margin in an uneven demand environment. I am pleased with the progress made on our enterprise initiatives to date. Our balance sheet continues to improve underscored by a meaningful reduction in our net leverage ratio relative to the prior year period. "
Unsurprisingly, the stock is down 3.2% since reporting and currently trades at $17.15.
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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 $6.89 billion, down 19% year on year, outperforming analysts’ expectations by 5.7%. The business had an exceptional quarter with an impressive beat of analysts’ earnings and operating margin estimates.
Arrow Electronics pulled off the biggest analyst estimates beat among its peers. The market seems content with the results as the stock is up 3.1% since reporting. It currently trades at $127.53.
Weakest Q2: 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 $318.8 million, down 13.6% year on year, falling short of analysts’ expectations by 9.6%. It was a disappointing quarter as it posted a miss of analysts’ earnings estimates.
Worthington delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 9.9% since the results and currently trades at $45.17.
Regal Rexnord (NYSE:RRX) Headquartered in Milwaukee, Regal Rexnord (NYSE:RRX) provides power transmission and industrial automation products.
Regal Rexnord reported revenues of $1.55 billion, down 12.5% year on year. This number beat analysts’ expectations by 2.7%. It was a very strong quarter as it also produced an impressive beat of analysts’ operating margin estimates and a solid beat of analysts’ organic revenue estimates.
The stock is down 3% since reporting and currently trades at $155.81.
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 $260.8 million, up 4.8% year on year. This result lagged analysts' expectations by 6%. Overall, it was a softer quarter as it also recorded a miss of analysts’ earnings estimates. In addition, full-year revenue guidance missed analysts’ expectations.
The stock is up 7.5% since reporting and currently trades at $120.65.
This content was originally published on Stock Story
