Securing the future of production News ad

The manufacturing sector is the cornerstone of the American economy and is experiencing a renaissance. Technological advances and a new emphasis on sustainability are driving this renaissance. Manufacturing is losing its image as a relic of the past and embracing a future defined by innovation and efficiency.

At the forefront of this transformation are two outstanding companies, each with a history spanning more than a century. These two industry giants are adapting to the changing landscape of the industry and actively shaping it to their advantage, demonstrating that legacy companies can be at the forefront of progress.

Timken: Built for Continued Success

Timken today

$72.03 +0.20 (+0.28%)

(As of 12/26/2024 5:11 PM ET)

52 week range

$70.20

▼

$94.71

Dividend yield

1.89%

P/E ratio

14.98

Target price

$92.90

Timken Company New York Stock Exchange: TKR was founded in 1899 and has a rich history of contributing to some of the most significant technological breakthroughs of the last century. From the Wright Brothers’ first flight to space exploration, Timken bearings and industrial motion products have played a critical, yet often unseen, role. Today, with more than 19,000 employees in 45 countries and sales expected to reach $4.8 billion in 2023, Timken continues to be a global technology leader.

The company operates in two main segments: Engineered Bearings and Industrial Motion. The Engineering Bearings segment offers a wide range of products including tapered, spherical and cylindrical roller bearings. These components are essential to reduce friction and ensure smooth movement in various industries such as renewable energy, agriculture, construction and aerospace. The Industrial Motion segment complements this with offerings such as industrial drives, automatic lubrication systems and linear motion products, serving a variety of industries including automation, marine and medical.

Timken’s earnings report for the third quarter of fiscal year 2024 (3QFY24) showed sales of $1.13 billion, down 1.4% from the same period in 2023. China. Earnings per share (EPS) for the quarter were $1.16 and adjusted earnings per share were $1.23. Net profit was $81.8 million. Despite the modest year-over-year decline, Timken generated solid operating cash flow of $123.2 million and free cash flow of $88.2 million. As of the third quarter, the company maintains a healthy net debt to adjusted EBITDA ratio of 2.1 times.

Strategically, Timken is actively expanding its capabilities and market reach. A notable recent move was the acquisition of CGI, Inc., a manufacturer of precision drive systems. This acquisition will strengthen Timken’s position in the growing medical robotics and automation markets. In September 2024, there was a significant change in leadership with Tarak Mehta taking over as President and CEO, demonstrating a continued commitment to innovation and growth. The company recently celebrated its 125th anniversary by taking the opportunity to ring the opening bell of the New York Stock Exchange.

Eaton: Electrifying the path to progress

Eton today

$340.16 -1.38 (-0.40%)

(As of 12/26/2024 5:36 PM ET)

52 week range

$231.84

▼

US$379.99

Dividend yield

1.11%

P/E ratio

36.19

Target price

$367.83

Eaton Corporation plc was founded in 1911. New York Stock Exchange: ETN Since its inception, the company has become a global leader in intelligent power management. With a presence in more than 160 countries and revenue of $23.2 billion in 2023, Eaton’s mission is to improve quality of life and the environment through its power management technologies and services. The company’s operations are divided into five segments: Electrical Americas, Electrical Global, Aerospace, Vehicle and eMobility.

The Electrical Americas and Electrical Global segments provide a broad range of electrical components, power distribution systems and related services. These segments serve a diverse clientele, including data centers, utilities and industrial facilities. The Aerospace segment is a key supplier to commercial and military aircraft manufacturers, offering hydraulic systems, fuel systems and other critical components. Eaton’s Vehicle division supplies the automotive industry with transmissions, clutches and engine valves. Finally, the fast-growing e-mobility segment is focusing on developing innovative solutions for electric vehicles such as voltage inverters, converters and power distribution systems.

Eaton’s fiscal 2024 third quarter earnings report broke records thanks to the company’s strong financial results. Sales reached an impressive $6.3 billion, reflecting an organic growth rate of 8%. The company achieved record segment profitability of 24.3% and reported earnings per share of $2.53 on adjusted earnings per share of $2.84. Operating cash flow was US$1.3 billion and free cash flow was US$1.1 billion.

Eaton’s strategic vision is closely aligned with global megatrends such as electrification, energy transition and digitalization. The Company is actively involved in numerous infrastructure “megaprojects” throughout North America, demonstrating its commitment to these growth areas. The notable collaboration with Tesla is aimed at optimizing the adoption of home energy storage solutions, further strengthening Eaton’s position in the expanding residential market. To support its growth ambitions, Eaton announced plans to invest an additional $1.5 billion in capacity.

Comparative financial analysis and growth prospects

Although Timken and Eaton operate in the broader manufacturing sector, their financial profiles and growth trajectories present an interesting contrast. Timken, which specializes in bearings and industrial drives, is experiencing steady and moderate growth. Eaton, with its broader portfolio that includes electrical systems and a strong focus on electrification, is on a more aggressive growth trajectory, as evidenced by its record financial performance.

Both companies have demonstrated a commitment to delivering shareholder returns through consistent dividend payments. Timken’s current dividend yield is 1.92% and its annual dividend is $1.36 per share. Impressively, Timken has increased its dividend for 11 straight years. Eaton’s dividend yield is slightly lower at 1.12%, and its annual dividend is $3.76 per share. Eaton has paid a dividend every year since 1923, demonstrating its reliability as a long-term dividend stock.

The future of manufacturing

The resurgence of American manufacturing is a fundamental shift in the sector, driven by innovation and a growing emphasis on sustainability. Timken and Eaton are excellent examples of companies thriving through this transformation. Their commitment to developing cutting-edge technologies, entering high-growth markets and prioritizing sustainable practices positions them for continued success in the coming years. Both companies are actively embracing the challenges and opportunities presented by the evolving global situation. Timken’s focus on precision engineering and its expansion into emerging sectors such as automation, coupled with Eaton’s leadership in electrification and power management, demonstrates its readiness to meet the needs of a rapidly changing world.

Timken and Eaton offer investors attractive investment opportunities. They represent stakes in solid, well-managed companies and an opportunity to participate in the ongoing recovery of a critical market sector. While past performance is never an indicator of future performance, the strategic direction, financial condition and market positioning of these two industry anchors suggest that they are well positioned to create a successful future in the new era of manufacturing.

Before you consider Timken, you need to hear this.

MarketBeat tracks Wall Street’s top-rated and best-performing analysts daily and the stocks they recommend to their clients. MarketBeat identified five stocks that top analysts are quietly whispering to their clients to buy now, before the broader market takes hold… and Timken wasn’t on the list.

While Timken is currently being rated a Moderate Buy by analysts, the top-rated analysts rate these five stocks as Strong Buys.

View five stocks here

Which stocks are most likely to thrive in today’s challenging market? Click the link below and we’ll send you MarketBeat’s list of 10 stocks that will rise in any economic climate.

Get this free report