Benzinga | Nov 1, 2021 09:26AM EDT

Timken Clocks 16% Sales Growth In Q3, Notes Margin Pressure

* Timken Co (NYSE:TKR) reported third-quarter FY21 sales growth of ~16% year-over-year to $1.037 billion, beating the consensus of $1.01 billion.

* The sales increase was driven by organic growth across most end-market sectors led by industrial distribution and off-highway, higher pricing, and the benefit of currency translation and acquisitions.

* Process Industries sales $550 million (+18% Y/Y) and adjusted EBITDA margin contracted 90 basis points to 23.8%.

* Mobile Industries sales $487.3 million (+13.7% Y/Y) and adjusted EBITDA margin contracted 410 basis points to 11.9%.

* Adjusted EPS improved to $1.18 compared to $1.13 in 3Q20, beating the consensus of $1.17.

* The gross margin contracted by 365 bps to 25.8%. The operating income increased 4.5% Y/Y to $124.3 million, and the margin contracted by 132 bps to 12%.

* Timken generated cash from operating activities year-to-date of $284.6 million, compared to $457.2 million a year ago.

* Adjusted EBITDA improved to $178.6 million (+3% Y/Y), and margin contracted by 218 bps to 17.2%.

* The company said its backlog, orders remain strong and expects a robust demand environment and significant price realization in 2022.

* "We expect operating conditions through the rest of the year to be similar to the third quarter, with the benefits of strong demand being largely offset by inflation and higher costs to serve customers," said Richard G. Kyle, Timken president, and CEO.

* Price Action: TKR closed lower by 0.30% at $70.95 on Friday.