Although we usually do not think about them too often, springs are rather important devices. They are in all manner of equipment from consumer electronics to large engines. There is an outfit in Bristol, Connecticut that is one of the largest precision spring manufacturers in the world. It makes thousands of other necessary parts, too.
Barnes Group (NYSE: B) is an international aerospace and industrial components manufacturing and distribution company. The firm operates through three divisions. Barnes Aerospace is a highly specialized manufacturer of components and assemblies used in commercial, business and military jets and industrial gas turbines. Barnes Industrial manufactures springs, manifold systems, retaining rings, and injection-molded plastic components. Barnes Distribution is a leading distributor of maintenance, repair, operating and production supplies, such as fasteners, electrical components, abrasives, adhesives and tools. Customers include Boeing (NYSE: BA), General Electric (NYSE: GE), Honeywell International (NYSE: HON), Lockheed Martin (NYSE: LMT) and United Technologies (NYSE: UTX).
The company pleased investors last week, when it reported Q1 EPS of fifty cents and revenues of $360.7 million. Analysts had been expecting forty cents and $340.4 million. Management also guided FY07 EPS to $1.74-1.83 ($1.60 consensus). Banc of America Securities and Robert W. Baird declared the stock a "buy" and boosted their price targets to $33.
The shares popped above 30-day moving average support on the news and subsequently moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Altogether, brokers now recommend the issue with two "strong buys", three "buys" and three "holds". Analysts see a 22 percent average annual growth rate, through the next five years. The B PEG ratio (0.86), Price to Sales ratio (1.17), Price to Book ratio (2.83), Price to Cash Flow ratio (12.03), Price to Free Cash Flow ratio (30.23), Sales Growth rate (20.28%) and EPS Growth rate (35.14%), compare favorably with industry, sector and S&P 500 averages.
Institutional investors hold about 76% of the outstanding shares. The stock is one of the used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $15.28 and $30.07. A stop-loss of $25.40 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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