Timken Reports Third-Quarter 2024 Results

Sales of $1.13 billion, down 1.4 percent from last year

Third-quarter earnings per share of $1.16; adjusted EPS of $1.23

Cash from operations of $123 million and free cash flow of $88 million

Updates full-year 2024 outlook; now expects EPS of $4.65-$4.75, with adjusted EPS of $5.55-$5.65

The Timken Company (NYSE: TKR; www.timken.com), a global technology leader in engineered bearings and industrial motion, today reported third-quarter 2024 sales of $1.13 billion, down 1.4 percent from the same period a year ago. The decrease was driven primarily by lower end-market demand in Europe and China, partially offset by the benefit of acquisitions. Organically, sales were down 2.9 percent from last year.

Timken posted net income in the third quarter of $81.8 million or $1.16 per diluted share. This compares to net income of $87.9 million or $1.23 per diluted share for the same period a year ago. The company's net income margin in the quarter was 7.3 percent, compared to 7.7 percent in the third quarter of last year.  

Excluding special items (detailed in the attached tables), adjusted net income in the third quarter was $87.0 million or $1.23 per diluted share. This compares to adjusted net income of $111.2 million or $1.55 per diluted share for the same period in 2023. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter was $190.0 million or 16.9 percent of sales, compared with $215.8 million or 18.9 percent of sales in the third quarter of last year.

Net cash provided from operating activities in the quarter was $123.2 million, and free cash flow was $88.2 million. During the quarter, Timken completed the acquisition of CGI, Inc., a manufacturer of precision drive systems for medical robotics and other automation sectors. As of the end of the third quarter, the company's net debt-to-adjusted EBITDA ratio was 2.1 times, with no significant debt maturities until 2027.

"It is an honor to be part of the talented Timken team as we work to accelerate profitable growth and customer-centric innovation," said Tarak Mehta, president and chief executive officer. "Looking at the quarter, profitability fell short of our expectations, and we are taking further steps to improve operating margins. In the current market environment, we remain committed to improving reliability and efficiency for our customers and generating strong earnings and cash flow for our shareholders."

Third-Quarter 2024 Segment Results

Engineered Bearings sales of $740.7 million decreased 4.5 percent from the same period a year ago. The decrease was driven primarily by lower end-market demand in Europe and China. Among market sectors, renewable energy saw the most significant organic decline in the quarter, driven by continued weakness in China. The off-highway, auto/truck and general & heavy industrial sectors were also lower, while industrial distribution, aerospace and rail shipments were higher compared to the same period a year ago.

EBITDA for the quarter was $150.0 million or 20.3 percent of sales, compared with EBITDA of $148.2 million or 19.1 percent of sales for the same period a year ago. The current quarter includes a gain related to the sale of a recently closed facility.

Excluding special items, adjusted EBITDA in the quarter was $138.4 million or 18.7 percent of sales, compared with $156.7 million or 20.2 percent of sales in the third quarter of last year. The decrease in adjusted EBITDA was driven primarily by the impact of lower volume and higher logistics and manufacturing costs, partially offset by favorable price/mix.

Industrial Motion sales of $386.1 million increased 5.2 percent compared with the same period a year ago. The increase was driven primarily by the benefit of acquisitions, partially offset by modestly lower end-market demand. Organically, the automatic lubrication systems platform posted the largest decline, while drive systems revenue was notably up.

EBITDA for the quarter was $70.9 million or 18.4 percent of sales, compared with EBITDA of $70.3 million or 19.2 percent of sales for the same period a year ago.

Excluding special items, adjusted EBITDA in the quarter was $74.2 million or 19.2 percent of sales, compared with $75.2 million or 20.5 percent of sales in the third quarter of last year. The modest decrease in adjusted EBITDA was driven primarily by the impact of lower volume and higher operating costs, partially offset by the benefit of acquisitions.

2024 Outlook

Timken is reducing its full-year 2024 outlook, with earnings per diluted share now forecasted to be in the range of $4.65 to $4.75 and adjusted earnings per diluted share in the range of $5.55 to $5.65. The company now expects revenue to be down approximately 4 percent in total from 2023.

"The second half of this year has been more challenging than expected, and we are taking appropriate actions to strengthen the company for 2025 and beyond," said Mehta. "Our team is focused on reducing costs near-term while advancing the company for the long-term. Timken remains well-positioned to capitalize on an industrial market recovery when it occurs and to benefit from continuing secular growth trends. As Timken celebrates its 125th anniversary, we are more confident than ever about the future of the company and excited by the opportunities that lie ahead."