TKR Q4 Earnings Beat Estimates, Decline 15% Y/Y on Weak Demand

Core Viewpoint - The Timken Company reported a decline in earnings and revenues for the fourth quarter of 2024, primarily due to lower demand in Europe and unfavorable currency translation, despite beating consensus estimates for earnings and revenues [1][2][11]. Financial Performance - Adjusted EPS for Q4 2024 was $1.16, exceeding the Zacks Consensus Estimate of $0.97, but reflecting a 15% year-over-year decline [1] - Reported EPS was $1.01 compared to $0.83 in the prior-year quarter [2] - Total revenues for Q4 were $1.07 billion, down 1.6% year-over-year, but above the Zacks Consensus Estimate of $1.06 billion [2][11] - Organic sales decreased by 2.6% [2] Cost and Margin Analysis - Cost of sales decreased by 1.5% to $749 million, while gross profit fell by 2% year-over-year to $325 million [3] - Gross margin was 30.3%, slightly down from 30.4% in the previous year [3] - Adjusted EBITDA declined by 9% year-over-year to $178 million, with an adjusted EBITDA margin of 16.6%, a contraction of 130 basis points from the prior year [4] Segment Performance - Engineered Bearings segment revenues fell by 2% year-over-year to $708 million, impacted by lower demand in Europe and unfavorable currency translation [5] - Adjusted EBITDA for the Engineered Bearings segment was $122 million, down 8% from the previous year [6] - Industrial Motion segment revenues declined by 0.3% year-over-year to $366 million, missing projections [7] - Adjusted EBITDA for the Industrial Motion segment was $71 million, down from $82 million in the previous quarter [8] Cash Flow and Balance Sheet - Cash and cash equivalents at the end of 2024 were $373 million, down from $419 million at the end of 2023 [9] - Cash flow from operating activities was $476 million, compared to $545 million in the prior year [9] - Long-term debt increased to $2.19 billion from $1.79 billion year-over-year [9] Dividend and Shareholder Returns - The company increased its quarterly dividend by 3% to $0.34 per share, marking the eleventh consecutive year of higher annual dividends [10] - Total returns to shareholders through dividends and share repurchases amounted to $136.6 million during the year [10] 2024 Performance Overview - For 2024, adjusted earnings were $5.79 per share, surpassing the Zacks Consensus Estimate of $5.61, but reflecting an 18% decline from the prior year [11] - Total revenues fell by 4% year-over-year to $4.57 billion, although this figure beat the Zacks Consensus Estimate of $4.56 billion [11][12] 2025 Guidance - For 2025, the company expects total revenues to decline by 1-4% from 2024 levels, with organic sales anticipated to decrease by 1% at the midpoint [13] - Adjusted EPS guidance for 2025 is between $5.30 and $5.80, indicating a year-over-year decline of 4% [14] - Cost-reduction actions are expected to yield savings of approximately $75 million in 2025 [14] Stock Performance - Over the past year, TKR shares have gained 2.1%, contrasting with a 31% decline in the industry [15]