Timken Shares Dip As Q2 Falls Short; FY23 Outlook Reduced Citing Current Order Trends

The Timken Company TKR shares are trading lower by around 9% after it reported a Q2 FY23 earnings miss and reduced FY23 guidance. 

Revenue grew 10.3% Y/Y to $1.27 billion, missing the consensus of $1.29 billion.

The increase was driven by acquisitions (net of divestitures) and continued organic growth across both segments led by Industrial Motion.

Adjusted EPS of $2.01 missed the consensus of $2.07.

Sales by segment: Engineered Bearings $857.2 million (+7.4% Y/Y) and Industrial Motion $415.1 million (+16.8% Y/Y).

Adjusted EBITDA stood at $263.0 million vs. $231.2 million the prior year.

Timken returned $124.3 million to shareholders during the quarter, repurchasing around 1.3 million shares and increasing the quarterly dividend per share by 6% to $0.33.

Operating cash flow stood at $144.0 million, and free cash flow reached $94.4 million in the quarter.

FY23 Outlook: Timken cut the FY23 adjusted EPS outlook to $6.90-$7.30 (from $7.00-$7.50 earlier) vs. consensus of $7.41 and revenue growth outlook to 8% (prior 9.5%) in total at the midpoint from 2022.

"We have updated our outlook to reflect current order trends and continued near-term economic uncertainty. Macro drivers remain constructive across most of the markets we serve, and Timken is on track to deliver all-time record results in 2023. Looking ahead, we will continue to focus on advancing our proven strategy to drive profitable growth and resilient performance," said Richard G. Kyle, president and chief executive officer. 

Price Action: TKR shares are trading lower by 9.19% at $82.96 on the last check Thursday.