Timken Is Poised For Growth, Stifel Says In Bullish Turn

Stifel expressed confidence in manufacturer Timken Co TKR after a meeting with the company's management. 

The Analyst

Analyst Stanley Elliott upgraded Timken from Hold to Buy and increased the price target from $52 to $60.

The Thesis

Following two years of organic declines, Timken's end markets have rebounded, Elliott said in a Sunday note. Despite being in recovery mode for five quarters, Timken's market recovery has accelerated only within the past 60 days, the analyst said.

Timken raised its full-year guidance twice in that timeframe, with 12-percent organic growth expected for the full year, Elliott said.

The outlook is supportive of mid-single-digit volume growth into 2019, according to Stifel. 

"Pricing recently turned positive for the company in 1Q18 and expectations are that relationship remains through the remainder of the year." 

Timken's shares have underperformed the S&P 500 Index by 6 percent over the past year, dragged by cycle, price and cost and margin potential uncertainties , Elliott said. All appear manageable in the near-to-medium term, he said.

Stifel increased its estimates for Timken, citing higher margin assumptions.

The Price Action

Timken shares have added 2.6 percent year-to-date.

The stock was up 0.31 percent at $48.90 at the time of publication Tuesday.

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Photo courtesy of Timken.