Timken Co (NYSE: TKR)

Sector: Industrials Industry: Tools & Accessories CIK: 0000098362
Market Cap 7.62 Bn
P/B 2.43
P/E 25.63
P/S 1.68
ROIC (Qtr) 6.86
Div Yield % 0.31
Rev 1y % (Qtr) 2.69
Total Debt (Qtr) 2.21 Bn
Debt/Equity (Qtr) 0.70

About

The Timken Company, often simply referred to as Timken, is a major player in the design, manufacture, and marketing of engineered bearings and industrial motion products. With a rich history that spans over a century, the company has established itself as a trusted partner for customers across a multitude of industries. Timken's robust brand portfolio includes Timken, GGB, Philadelphia Gear, Cone Drive, Rollon, Nadella, Diamond, Drives, Groeneveld, BEKA, Des-Case, Lovejoy, and Lagersmit, among others. Timken's primary business activities revolve...

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Price action

Investment thesis

Bull case

  • Healthy cash reserves of 451.50M provide 21.10x coverage of short-term debt 21.40M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 549.60M provides exceptional 18.82x coverage of minority interest expenses 29.20M, showing strong core operations.
  • Operating cash flow of 549.60M provides strong 18.38x coverage of stock compensation 29.90M, indicating sustainable incentive practices.
  • Robust free cash flow of 393.20M exceeds capital expenditure of 156.40M by 2.51x, indicating strong organic growth funding capability.
  • Cash position of 451.50M provides exceptional 15.46x coverage of minority interest expenses 29.20M, indicating strong liquidity.

Bear case

  • Operating cash flow of 549.60M barely covers its investment activities of (161.70M), with a coverage ratio of -3.40, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 549.60M provides thin coverage of dividend payments of (97.80M) with a -5.62 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Operating earnings of 515.40M show weak coverage of depreciation charges of 227.10M, with a 2.27 ratio indicating high capital intensity and potential reinvestment needs.
  • Free cash flow of 393.20M represents just -2.30x of debt issuance (171.10M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • High depreciation of 227.10M relative to operating cash flow of 549.60M, which is 0.41x suggests significant maintenance capital requirements affecting free cash flow.

Segments Breakdown of Revenue (2024)

Segments Breakdown of Revenue (2024)

Peer comparison

Companies in the Tools & Accessories
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 SNA Snap-on Inc 20.19 Bn 30.93 5.05 1.27 Bn
2 LECO Lincoln Electric Holdings Inc 19.47 Bn 86.76 6.42 1.24 Bn
3 RBC RBC Bearings INC 17.20 Bn 64.04 9.61 1.05 Bn
4 SWK Stanley Black & Decker, Inc. 13.10 Bn 13.72 1.16 6.61 Bn
5 TTC Toro Co 10.73 Bn 40.62 4.32 1.04 Bn
6 TKR Timken Co 7.62 Bn 25.63 1.68 2.21 Bn
7 KMT Kennametal Inc 3.10 Bn 28.08 1.52 0.64 Bn
8 HLMN Hillman Solutions Corp. 1.92 Bn 51.25 1.25 0.78 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.39 2.01
EV to Cash from Ops. EV/CFO 17.25 24.93
EV to Debt EV to Debt 4.30 8.39
EV to EBIT EV/EBIT 18.40 24.47
EV to EBITDA EV/EBITDA 12.30 17.60
EV to Free Cash Flow [EV/FCF] EV/FCF 24.12 35.32
EV to Market Cap EV to Market Cap 1.24 1.11
EV to Revenue EV/Rev 2.09 3.42
Price to Book Value [P/B] P/B 2.43 5.86
Price to Earnings [P/E] P/E 25.63 36.30
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 3.04 -1.46
Dividend Payout Ratio % Div Payout % (Qtr) 8.00 33.38
Dividend per Basic Share Div per Share (Qtr) 0.34 1.81
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 6.02 30.74
Interest Coverage Int. cover (Qtr) 4.62 7.86
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -3.10 18.88
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 9.22 10.48
Dividend Growth (1y) % Div 1y % (Qtr) -74.63 -11.72
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -13.45 58.71
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -6.10 -4.11
EBIT Growth (1y) % EBIT 1y % (Qtr) -9.72 77.69
EBT Growth (1y) % EBT 1y % (Qtr) -8.85 236.46
EPS Growth (1y) % EPS 1y % (Qtr) -12.37 93.96
FCF Growth (1y) % FCF 1y % (Qtr) 43.66 -577.35
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -3.72 0.72
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.67 0.84
Cash Payout Ratio Cash Payout (Qtr) 0.14 0.18
Cash Ratio Cash Ratio (Qtr) 0.51 0.44
Current Ratio Curr Ratio (Qtr) 3.11 2.80
Debt to Equity Ratio Debt/Equity (Qtr) 0.70 0.52
Interest Cover Ratio Int Coverage (Qtr) 4.62 7.86
Times Interest Earned Times Interest Earned (Qtr) 4.62 7.86
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 16.30 14.56
EBIT Margin % EBIT Margin % (Qtr) 11.34 10.14
EBT Margin % EBT Margin % (Qtr) 8.89 8.34
Gross Margin % Gross Margin % (Qtr) 30.70 33.75
Net Profit Margin % Net Margin % (Qtr) 6.50 6.08