JBT Earnings: Solid Quarter With Few Surprises

Nothing in narrow-moat-rated JBT’s JBT latest results materially alters our long-term view. We are raising our fair value estimate to $119 per share from $117 due to the time value of money.

The puts and takes in third-quarter results mostly offset one another. Sales dipped marginally below our expectations, while adjusted earnings (on a continuous basis) moved slightly higher than we forecast. We now expect about $0.02 less in adjusted EPS, with our estimate dropping to $3.98. That’s despite revised guidance that implies a higher midpoint by $0.10 (now just under $4.03). This was a solid quarter with few surprises.

While we stand by our skepticism of the AeroTech deal and its benefits, we think JBT stock was overdue to rally, as it did on the trading day (rising 10%). Despite our reservations about what we believe was a value-dilutive deal, we do like that JBT will have greater focus as a pure-play food and beverage company. We’ll have to see how JBT fares moving forward, given that overall M&A activity remains muted amid rising rates and macroeconomic uncertainty. The company’s business model and our thesis are somewhat dependent on good deal flow.

On an organic basis, however, rising wholesale prices, lower corn feed costs, and improving profitability among poultry customers should translate to better order patterns moving forward. Management also flagged strength in its fruit and vegetable, beverage, dairy, and turkey end markets, as well as strength in its warehouse automation business. Strength in warehouse automation is a welcome surprise, given the slowdown we’ve seen in other industrials like Honeywell, which leads us to believe that JBT is less exposed to Amazon risk.

JBT has also invested in food safety technology company Innospexion. We like this investment, given that company’s technology and its ability to identify even the smallest bones. This is the type of focused investing we hope to see from JBT moving forward.