John Bean Technologies Earnings: Digital Investments and Portfolio Moves, a Path to Value Creation

Following its first-quarter earnings report, our long-term, fundamental view for narrow-moat-rated John Bean Technologies JBT remains unchanged. We raise our fair value estimate by $1 to $121 but only due to time value of money. JBT readily outperformed its first-quarter guide on the strength of the aerospace recovery as well as foodtech’s recurring revenue mix contribution to operating margins. Aerotech sales soared, rising nearly 25% year on year on both a reported and organic basis. This propelled its segment operating margins by an additional 330 basis points.

We think there may be some conservatism baked into the guide given the runway of the commercial aerospace recovery. We’ve also heard other providers of industrial equipment talk about the incremental benefits from infrastructure spending, and we think it may provide a longer tailwind for its Jetway passenger bridges. However, we hesitate to overreact to one set of data points, particularly since the first quarter is traditionally JBT’s weakest. Of course, inflation and the general macroeconomic environment also give us further pause. Nevertheless, we’re very pleased with the results.

Foodtech also benefited from continued improvements in price/cost, which is another proof point that it benefits from intangible assets. Its customers continue to benefit from automation. While the equipment represents a considerable capital cost for customers, we think the benefits are clear from both an operating efficiency and a total cost of ownership standpoint. The firm also benefits from switching costs in recurring aftermarket revenue. In fact, its subscription-based OmniBlu data analytics platform helps customers improve both equipment utilization and efficiency. Five of JBT’s product lines are currently connected to this platform, though a couple are further along in their lifecycle.