Analyzing Timken (TKR) & NN (NNBR)

Timken (NYSE: TKR) and NN (NASDAQ:NNBR) are both industrial products companies, but which is the superior stock? We will compare the two businesses based on the strength of their analyst recommendations, profitability, institutional ownership, dividends, earnings, valuation and risk.

Analyst Recommendations

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This is a breakdown of current recommendations and price targets for Timken and NN, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Timken 0 1 3 0 2.75
NN 0 2 2 0 2.50

Timken currently has a consensus price target of $51.00, indicating a potential upside of 9.44%. NN has a consensus price target of $33.67, indicating a potential upside of 50.63%. Given NN’s higher possible upside, analysts plainly believe NN is more favorable than Timken.

Volatility and Risk

Timken has a beta of 1.48, meaning that its share price is 48% more volatile than the S&P 500. Comparatively, NN has a beta of 0.8, meaning that its share price is 20% less volatile than the S&P 500.

Institutional and Insider Ownership

80.1% of Timken shares are held by institutional investors. Comparatively, 95.8% of NN shares are held by institutional investors. 11.2% of Timken shares are held by insiders. Comparatively, 2.7% of NN shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

This table compares Timken and NN’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Timken 6.77% 14.55% 6.47%
NN 4.87% 10.98% 2.97%

Earnings & Valuation

This table compares Timken and NN’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Timken $3.00 billion 1.21 $203.40 million $2.63 17.72
NN $619.79 million 1.00 $163.05 million $1.55 14.43

Timken has higher revenue and earnings than NN. NN is trading at a lower price-to-earnings ratio than Timken, indicating that it is currently the more affordable of the two stocks.

Dividends

Timken pays an annual dividend of $1.08 per share and has a dividend yield of 2.3%. NN pays an annual dividend of $0.28 per share and has a dividend yield of 1.3%. Timken pays out 41.1% of its earnings in the form of a dividend. NN pays out 18.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Timken has increased its dividend for 4 consecutive years. Timken is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Timken beats NN on 14 of the 17 factors compared between the two stocks.

About Timken

The Timken Company engineers, manufactures, and markets bearings, transmissions, gearboxes, belts, chains, lubrication systems, couplings, industrial clutches and brakes, and related products worldwide. It operates through two segments, Mobile Industries and Process Industries. The Mobile Industries segment offers a portfolio of bearings, seals, lubrication devices, and systems, as well as power transmission components, engineered chains, augers, belts, couplings, clutches and brakes, and related products and maintenance services to original equipment manufacturers (OEMs) and end users of off-highway equipment for the agricultural, construction, mining, outdoor power equipment, and power sports markets; and on-highway vehicles, including passenger cars, light trucks, and medium- and heavy-duty trucks, as well as rail cars and locomotives. It also provides power transmission systems and flight-critical components for civil and military aircraft, which comprise bearings, helicopter transmission systems, rotor-head assemblies, turbine engine components, gears, and housings. This segment sells it parts through a network of authorized automotive and heavy-truck distributors to individual end users, equipment owners, operators, and maintenance shops. The Process Industries segment supplies industrial bearings and assemblies; power transmission components, including gears and gearboxes; and couplings, seals, lubricants, chains, belts, and related products and services to OEMs and end-users in various industries. It also supports aftermarket sales and service needs through its network of authorized industrial distributors; and offers repair and service for bearings and gearboxes, as well as electric motor rewind, repair, and services to end users. The Timken Company was founded in 1899 and is headquartered in North Canton, Ohio.

About NN

NN, Inc., a diversified industrial company, designs and manufactures high-precision components and assemblies in the United States, Europe, Asia, Canada, Mexico, South America, and internationally. It operates through Autocam Precision Components Group and Precision Engineered Products Group segments. The Autocam Precision Components Group segment manufactures components for use in fuel delivery, electromechanical motor, steering, and braking systems for the automotive industry; and highly engineered shafts and mechanical components, as well as precision assembled and tested parts and fluid system components for the heating, ventilation, air conditioning, and fluid power industries. The Precision Engineered Products Group segment manufactures various components, assemblies, and instruments, including surgical knives, bio-resorbable implants, surgical staples, orthopedic system tools, laparoscopic devices, drug delivery devices, and catheter components for the medical and life sciences end markets; and electrical contacts, connectors, contact assemblies, and precision stampings for the electrical end market. It also provides precision components, assemblies, and electrical contacts and precision plastic components for the automotive and general industrial end markets; and various engineered materials, such as optical grade and thermally conductive plastics, as well as titanium, Inconel, magnesium, and gold electroplating for the aerospace and defense end markets. The company also engages in the design, development engineering, and manufacturing of medical device supply solutions. NN, Inc. was founded in 1980 and is headquartered in Johnson City, Tennessee.

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