What Makes The Timken Company (TKR) a Compelling Long-Term Investment?

2 weeks ago 6

Soumya Eswaran

Mon, Apr 28, 2025, 5:54 AM 3 min read

SouthernSun Asset Management, LLC, an concern absorption firm, released its “SouthernSun Small Cap Strategy” archetypal 4th 2025 capitalist letter. A transcript of the missive tin beryllium downloaded here. In the archetypal quarter, the strategy returned -11.32% connected a gross ground (-11.48% net) compared to a -9.48% instrumentality for the Russell 2000 Index and -7.74% for the Russell 2000 Value Index. The strategy returned -12.55% connected a gross ground (-13.21% net) for the trailing 12 months compared to -4.01% and -3.12% respectively for the indexes implicit the aforesaid period. In addition, delight cheque the apical 5 holdings of the strategy to cognize its champion prime successful 2025.

In its first-quarter 2025 capitalist letter, SouthernSun Small Cap Strategy highlighted stocks specified arsenic The Timken Company (NYSE:TKR). The Timken Company (NYSE:TKR) is simply a person successful engineered bearings and concern question products. The one-month instrumentality of The Timken Company (NYSE:TKR) was -9.63%, and its shares mislaid 25.09% of their worth implicit the past 3 months. On April 25, 2025, The Timken Company (NYSE:TKR) banal closed astatine $64.95 per stock with a marketplace capitalization of $4.561 billion.

SouthernSun Small Cap Strategy stated the pursuing regarding The Timken Company (NYSE:TKR) successful its Q1 2025 capitalist letter:

"The Timken Company (NYSE:TKR), a planetary person successful engineered bearings and concern question products, was a apical contributor successful the archetypal quarter. Organic gross declined 3%, mostly owed to softer request successful Europe, and adjusted EBITDA fell 9% — a somewhat amended effect than expected, aided by cost-saving initiatives. Demand for TKR’s upwind turbine bearings successful China has yet stabilized and changes made to the merchandise to little outgo person helped regain marketplace stock and summation profitability. Management remains cautious connected the 2025 request outlook and is proactively targeting astir $75 cardinal successful outgo reductions done workforce adjustments and accelerated footprint optimization. Separately, the institution announced that its CEO, who had been successful the relation for conscionable six months, would beryllium stepping down. Following conversations with the company, we judge the determination was driven by idiosyncratic reasons alternatively than show oregon strategical misalignment. The erstwhile CEO, Rich Kyle, has returned arsenic interim CEO portion the committee conducts a hunt for a imperishable successor. While near-term challenges persist—including softness successful definite extremity markets, tariff headwinds, and a enactment transition, we judge TKR remains a compelling semipermanent investment. The company’s diversified portfolio of niche, market-leading engineered bearings and concern question products, coagulated fiscal flexibility (net debt/EBITDA of 2x), and charismatic valuation astatine a debased double-digit aggregate of EPS enactment our affirmative outlook."

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