Timken Reports Third-Quarter 2023 Results

Sales of $1.14 billion, up approximately 1 percent from last year

Third-quarter earnings per share of $1.23; adjusted EPS of $1.55

Strong cash from operations of $194 million; free cash flow of $151 million

Updates 2023 outlook; now expects 2023 EPS of $5.60-$5.70, with adjusted EPS of $6.85-$6.95

The Timken Company (NYSE: TKR; www.timken.com), a global leader in engineered bearings and industrial motion products, today reported third-quarter 2023 sales of $1.14 billion, up 0.6 percent from the same period a year ago. The increase was driven by the benefit of acquisitions (net of divestitures), higher pricing and favorable foreign currency translation, partially offset by lower volume.

Timken posted net income in the third quarter of $87.9 million or $1.23 per diluted share. This compares to net income of $87.0 million or $1.18 per diluted share for the same period a year ago. Net income was 8.0 percent of sales in both periods.

Excluding special items (detailed in the attached tables), adjusted net income in the third quarter was $111.2 million or $1.55 per diluted share. This compares to adjusted net income of $120.5 million or $1.63 per diluted share for the same period in 2022. Adjusted EBITDA in the quarter was $215.8 million or 18.9 percent of sales, compared with $213.6 million or 18.8 percent of sales in the third quarter of last year.

Net cash from operations for the quarter was $194.3 million, and free cash flow was $150.7 million. During the quarter, Timken repurchased 775 thousand shares of company stock, or approximately 1 percent of outstanding shares. In total, the company returned $87.3 million of cash to shareholders through dividends and share repurchases in the third quarter.

The company completed two acquisitions during the quarter, Des-Case and Rosa Sistemi, both of which expand the company's Industrial Motion product portfolio. And in October, Timken announced an agreement to acquire iMECH and the divestiture of TWB. Overall, the net impact of these four transactions will add nearly $50 million of pro forma annual revenue and will be accretive to company margins.

"Timken posted solid results in the quarter despite challenging business conditions across several sectors and geographies," said Richard G. Kyle, Timken president and chief executive officer. "We executed well across the enterprise, as we expanded adjusted EBITDA margins in both segments and generated strong free cash flow. We also continued to deploy capital to strengthen our business and create sustained shareholder value, while maintaining a strong balance sheet."

Third-Quarter 2023 Segment Results

Engineered Bearings sales of $775.6 million decreased 0.5 percent from the same period a year ago. The decrease was driven by lower volume, partially offset by the benefit of acquisitions and higher pricing.

EBITDA for the quarter was $148.2 million or 19.1 percent of sales, compared with EBITDA of $150.4 million or 19.3 percent of sales for the same period a year ago. The modest decrease in EBITDA was driven primarily by the impact of lower volume, higher manufacturing costs, unfavorable foreign currency and higher impairment & restructuring charges, mostly offset by lower material & logistics costs, favorable price/mix and the benefit of acquisitions.

Excluding special items, adjusted EBITDA in the quarter was $156.7 million or 20.2 percent of sales, compared with $153.8 million or 19.7 percent of sales in the third quarter of last year.

Industrial Motion sales of $367.1 million increased 2.9 percent compared with the same period a year ago. The increase was driven by the benefit of acquisitions (net), higher pricing and favorable foreign currency translation, partially offset by lower volume. 

EBITDA for the quarter was $70.3 million or 19.2 percent of sales, compared with EBITDA of $34.9 million or 9.8 percent of sales for the same period a year ago. The increase in EBITDA was driven primarily by significantly lower impairment charges, favorable price/mix and lower material & logistics costs, partially offset by lower volume.

Excluding special items, adjusted EBITDA in the quarter was $75.2 million or 20.5 percent of sales, compared with $68.0 million or 19.1 percent of sales in the third quarter of last year.

2023 Outlook

Timken is updating its 2023 outlook, with full-year earnings per diluted share now forecasted to be in the range of $5.60 to $5.70 and adjusted earnings per diluted share in the range of $6.85 to $6.95. The company is now planning for 2023 revenue to be up 5 to 5.5 percent in total from 2022.

"We have updated our outlook to reflect softer end-market demand conditions and our expectation for continued channel inventory reductions in the fourth quarter," said Kyle. "We are taking steps to bring costs in line with the expected volume levels and deliver a solid finish to the year. We remain on track for 2023 to mark all-time record sales and earnings with another year of improved margins. And we remain committed to advancing our long-term strategy to scale Timken as a diversified industrial leader and consistently grow the revenue and earnings of the company."