Reflecting On Engineered Components and Systems Stocks’ Q3 Earnings: Worthington (NYSE:WOR)
Let’s dig into the relative performance of Worthington (NYSE:WOR) and its peers as we unravel the now-completed Q3 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 slower Q3. As a group, revenues missed analysts’ consensus estimates by 2% while next quarter’s revenue guidance was 1.9% below.
In light of this news, share prices of the companies have held steady as they are up 2.4% on average since the latest earnings results.
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 $257.3 million, down 17.5% year on year. This print fell short of analysts’ expectations by 13.1%. Overall, it was a disappointing quarter for the company with a miss of analysts’ adjusted operating income estimates.
“We had another respectable quarter thanks to our team’s focus on managing costs and serving our customers even as persistent higher interest rates and macroeconomic uncertainty continued to impact demand,” said Worthington Enterprises President and CEO Andy Rose.
Worthington Total Revenue
Worthington delivered the slowest revenue growth of the whole group. Unsurprisingly, the stock is down 9.8% since reporting and currently trades at $40.83.
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 $53.56 million, up 18.8% year on year, outperforming analysts’ expectations by 7.8%. The business had an exceptional quarter with a solid beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.
Graham Corporation Total Revenue
Graham Corporation delivered the biggest analyst estimates beat, fastest revenue growth, and highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 27.1% since reporting. It currently trades at $42.26.
Originally founded solely on tool and die manufacturing, Mayville Engineering Company (NYSE:MEC) specializes in metal fabrication, tube bending, and welding to be used in various industries.
Mayville Engineering reported revenues of $135.4 million, down 14.4% year on year, falling short of analysts’ expectations by 14.1%. It was a disappointing quarter as it posted full-year revenue and EBITDA guidance missing analysts’ expectations.
Mayville Engineering delivered the weakest performance against analyst estimates and weakest full-year guidance update in the group. As expected, the stock is down 24.5% since the results and currently trades at $16.43.
Formerly known as Nuturn, NN (NASDAQ:NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.
NN reported revenues of $113.6 million, down 8.7% year on year. This number missed analysts’ expectations by 5.7%. Overall, it was a softer quarter as it also logged a significant miss of analysts’ EBITDA estimates.
The stock is down 2.5% since reporting and currently trades at $3.83.
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 $830.7 million, down 4.8% year on year. This number was in line with analysts’ expectations. More broadly, it was a satisfactory quarter as it also produced an impressive beat of analysts’ EBITDA estimates but organic revenue in line with analysts’ estimates.
The stock is up 17.7% since reporting and currently trades at $21.50.
As a result of the Fed's rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed's 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump's victory in the US Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain. Said differently, there's still much uncertainty around 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Quality Compounder Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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