Timken Reports First-Quarter 2024 Results; Raises Full-Year Outlook

Sales of $1.19 billion, down 5.7 percent from last year

First-quarter earnings per share of $1.46; adjusted EPS of $1.77

Strong margin performance in the quarter, with net income margin of 8.7 percent and adjusted EBITDA margin of 20.7 percent

Raises full-year 2024 outlook; now expects EPS of $5.10-$5.40, with adjusted EPS of $6.00-$6.30, on improved organic revenue

The Timken Company (NYSE: TKR; www.timken.com), a global technology leader in engineered bearings and industrial motion, today reported first-quarter 2024 sales of $1.19 billion, down 5.7 percent from the same period a year ago. The decrease was driven by lower demand, including a significant decline in renewable energy in China, and unfavorable foreign currency translation, partially offset by the benefit of acquisitions (net of divestitures) and favorable pricing.

Timken posted net income in the first quarter of $103.5 million or $1.46 per diluted share. This compares to net income of $122.3 million or $1.67 per diluted share for the same period a year ago. The company's net income margin in the quarter was 8.7 percent, compared to 9.7 percent in the first quarter of last year.  

Excluding special items (detailed in the attached tables), adjusted net income in the first quarter was $125.7 million or $1.77 per diluted share. This compares to adjusted net income of $153.5 million or $2.09 per diluted share for the same period in 2023. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter was $246.4 million or 20.7 percent of sales, compared with $265.5 million or 21 percent of sales in the first quarter of last year.

During the quarter, Timken returned $24.5 million of cash to shareholders through the payment of its 407th consecutive quarterly dividend. As of the end of the first quarter, the company's net debt-to-adjusted EBITDA ratio was 2.1 times.

"Timken posted solid results in the first quarter," said Richard G. Kyle, Timken president and chief executive officer. "While below last year's record level, revenue in the quarter modestly exceeded our expectations. We also delivered strong margin performance, with improved execution and favorable price-cost largely mitigating the impact of lower year-over-year organic revenue. Our results continue to demonstrate the strength and resiliency of Timken's diverse portfolio and differentiated business model through dynamic economic conditions."  

In March, Timken announced its CEO succession plan, naming industry veteran Tarak Mehta as its next president and CEO, succeeding Richard G. Kyle. Mehta will join Timken in September, and Kyle, who has led the company since 2014, will move into an advisory role for a short transition period before retiring. Kyle will continue to serve on the company's board of directors.

Among other first-quarter highlights, Ethisphere recognized Timken as one of the World's Most Ethical Companies for the 13th time, and Fast Company featured Timken on its list of the World's Most Innovative Companies®.

First-Quarter 2024 Segment Results

Engineered Bearings sales of $802.5 million decreased 10.9 percent from the same period a year ago. The decrease was driven by lower demand and unfavorable foreign currency translation, partially offset by higher pricing. Among market sectors, renewable energy was down significantly in the quarter, off-highway was also lower, while rail was notably higher.

EBITDA for the quarter was $178.7 million or 22.3 percent of sales, compared with EBITDA of $205.0 million or 22.8 percent of sales for the same period a year ago. The decrease in EBITDA was driven primarily by the impact of lower volume, partially offset by favorable price/mix and improved operating cost performance.

Excluding special items, adjusted EBITDA in the quarter was $181.4 million or 22.6 percent of sales, compared with $203.8 million or 22.6 percent of sales in the first quarter of last year.

Industrial Motion sales of $387.8 million increased 7.1 percent compared with the same period a year ago. The increase was driven by the benefit of acquisitions and higher pricing, partially offset by lower demand. Most platforms were down from last year, with the belts and chain platform posting the largest decline, while services revenue was notably up.

EBITDA for the quarter was $77.3 million or 19.9 percent of sales, compared with EBITDA of $48.2 million or 13.3 percent of sales for the same period a year ago. The increase in EBITDA was driven primarily by lower impairment charges, the benefit of acquisitions, improved operating cost performance and favorable price/mix, partially offset by the impact of lower volume.

Excluding special items, adjusted EBITDA in the quarter was $82.1 million or 21.2 percent of sales, compared with $76.9 million or 21.2 percent of sales in the first quarter of last year.

2024 Outlook

Timken is increasing its full-year 2024 outlook, with earnings per diluted share now forecasted to be in the range of $5.10 to $5.40 and adjusted earnings per diluted share in the range of $6.00 to $6.30. The company now expects revenue to be down 2 to 4 percent in total from 2023.

"We are increasing our full-year outlook for revenue, margins and earnings per share to take into account our first-quarter performance and expectations for the rest of the year," said Kyle. "Our revenue outlook reflects improvement across multiple end-market sectors, offset partially by lower expectations for wind energy and unfavorable foreign currency translation. On the bottom line, we expect improved mix and strong operational execution to drive higher margins and earnings per share as compared to our prior outlook."

Kyle concluded, "While the macroeconomic environment remains uncertain in many areas, Timken has a proven track record of achieving higher and sustainable levels of performance through cycles. Our first-quarter results and full-year outlook reflect the positive changes to the Timken portfolio over the last decade. We are confident in our ability to deliver solid results in 2024, and we remain focused on advancing our profitable growth strategy to drive shareholder value for years to come."