Q2 Earnings Outperformers: Arrow Electronics (NYSE:ARW) And The Rest Of The Engineered Components and Systems Stocks

Anthony Lee

Tue, Oct 22, 2024, 12:02 AM 4 min read

Engineered components and systems companies possess technical know-how in sometimes narrow areas such as metal forming or intelligent robotics. Lately, automation and connected equipment collecting analyzable data have been trending, creating new demand. On the other hand, like the broader industrials sector, engineered components and systems companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

The 13 engineered components and systems stocks we track reported a satisfactory Q2. As a group, revenues missed analysts’ consensus estimates by 1.2% while next quarter’s revenue guidance was 0.9% below.

Big picture, the Federal Reserve has a dual mandate of inflation and employment. The former had been running hot throughout 2021 and 2022 but cooled towards the central bank's 2% target as of late. This prompted the Fed to cut its policy rate by 50bps (half a percent) in September 2024. Given recent employment data that suggests the US economy could be wobbling, the markets will be assessing whether this rate and future cuts (the Fed signaled more to come in 2024 and 2025) are the right moves at the right time or whether they're too little, too late for a macro that has already cooled.

Thankfully, engineered components and systems stocks have been resilient with share prices up 8.5% on average since the latest earnings results.

Arrow Electronics (NYSE:ARW)

Founded as a single retail store, Arrow Electronics (NYSE:ARW) provides electronic components and enterprise computing solutions to businesses globally.

Arrow Electronics reported revenues of $6.89 billion, down 19% year on year. This print exceeded analysts’ expectations by 5.7%. Overall, it was an exceptional quarter for the company with an impressive beat of analysts’ earnings estimates and EBITDA estimates.

Arrow Electronics achieved the biggest analyst estimates beat but had the slowest revenue growth of the whole group. Unsurprisingly, the stock is up 8.4% since reporting and currently trades at $134.08.

Is now the time to buy Arrow Electronics? Access our full analysis of the earnings results here, it’s free.

Best Q2: Mayville Engineering (NYSE:MEC)

Originally founded solely on tool and die manufacturing, Mayville Engineering Company (NYSE:MEC) specializes in metal fabrication, tube bending, and welding to be used in various industries.

Mayville Engineering reported revenues of $163.6 million, up 17.7% year on year, outperforming analysts’ expectations by 2.8%. The business had a stunning quarter with an impressive beat of analysts’ operating margin estimates and full-year revenue guidance exceeding analysts’ expectations.

Mayville Engineering achieved the fastest revenue growth and highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 21.4% since reporting. It currently trades at $20.35.

Is now the time to buy Mayville Engineering? Access our full analysis of the earnings results here, it’s free.

Weakest Q2: Worthington (NYSE:WOR)

Founded by a steel salesman, Worthington (NYSE:WOR) specializes in steel processing, pressure cylinders, and engineered cabs for commercial markets.

Worthington reported revenues of $257.3 million, down 17.5% year on year, falling short of analysts’ expectations by 13.1%. It was a disappointing quarter as it posted a miss of analysts’ Building Products revenue estimates.

Worthington delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 8.9% since the results and currently trades at $41.24.

Read our full analysis of Worthington’s results here.

Applied Industrial (NYSE:AIT)

Formerly called The Ohio Ball Bearing Company, Applied Industrial (NYSE:AIT) distributes industrial products–everything from power tools to industrial valves–and services to a wide variety of industries.

Applied Industrial reported revenues of $1.16 billion, flat year on year. This number missed analysts’ expectations by 2.1%. Overall, it was a slower quarter as it also produced underwhelming earnings guidance for the full year and a miss of analysts’ organic revenue estimates.

The stock is up 15.6% since reporting and currently trades at $229.98.

Read our full, actionable report on Applied Industrial here, it’s free.

Timken (NYSE:TKR)

Established after the founder noticed the difficulty freight wagons had making sharp turns, Timken (NYSE:TKR) is a provider of industrial parts used across various sectors.

Timken reported revenues of $1.18 billion, down 7.1% year on year. This print was in line with analysts’ expectations. More broadly, it was a mixed quarter as it also produced a miss of analysts’ operating margin estimates.

The stock is flat since reporting and currently trades at $85.56.

Read our full, actionable report on Timken here, it’s free.

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