A High Quality Industrial Company

Posted: May 31, 2012 at 11:16 pm


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By Andrs Cardenal - May 31, 2012 | Tickers: ITW, KMT, NUE, TKR, X | 0 Comments

Andrs is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

These are not easy times for companies in the industrial or steel sector. The economic crisis in Europe and the slowdown in China are producing lackluster demand for many firms in the industry. However, you couldnt tell that by looking at the financial and operating performance of The Timken Company (NYSE: TKR) which reported better than expected results over the last quarters.

The company supplies anti-friction and power transmission components to an ample variety of industrial clients. Its products are used to reduce frictions in planes, trains and automobiles. Timken is also in the steel business, manufacturing specialty alloy steel bars, tubes and precision components. Although the company is quite diversified, we could say that its markets are also very exposed to the economic cycle, and for that reason it sounds reasonable to expect some weakness in times of economic uncertainty.

But that is not the case at all: In fact, Timken reported record earnings per share for the last quarter, and also increased guidance for the rest of the year. Management sounds quite optimistic about performance in the following months, form the press release:

Our record performance, as well as our confidence in our improved full-year earnings outlook, stand as further testimony to the companys ability to execute at a structurally higher level of performance, said James W. Griffith, Timken president and chief executive officer. Around the globe, our company is operating very well, leveraging momentum we see in our target markets, earning new business through our expanded product and services portfolio, and successfully driving those gains to the bottom line.

The last quarter was not an isolated event; Timken has a solid track record at performing better than estimated by Wall Street analysts and last year was another historical record in terms of sales and earnings, fully recovering from the last recession and challenging the adverse economic scenario.

Management has been moving away from low margin operations and into businesses with higher profitability. In 2009 for example, Timken sold its needle roller bearings business to JTEKT for $330 million reducing its presence in the light vehicle market. From 2007 to 2011 Timken has made several acquisitions in the aerospace and industrial sectors, and those deals have provided the basis for above average performance in the current environment.

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A High Quality Industrial Company

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May 31st, 2012 at 11:16 pm