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JBT Earnings: AeroTech Sale a Lackluster Deal for Shareholders, Though the Quarter Was As Expected

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John Bean Technologies Corp
(JBT)

After reviewing narrow-moat-rated John Bean Technologies’ JBT second-quarter results, we reduce our fair value estimate to $117 per share from $121 previously. Our reduced fair value mostly stems from fully modeling the sale of AeroTech to OshKosh at a discount to our calculated intrinsic value (a negative $5 impact). However, the anticipated carryover benefits to remaining JBT’s operating margins from its announced restructuring actions partially offset this impact with a $1 benefit to valuation.

We don’t like the deal and we think management both mistimed and mispriced this one, particularly since many of the benefits from the commercial aerospace recovery could have accrued to JBT. While many conglomerates generally don’t make sense since investors can diversify their own portfolios, it’s still up to management to unlock the most value for shareholders.

We generally like the benefits of focused portfolios and asset sales allow management teams to recycle capital into attractive organic and mergers and acquisitions opportunities. However, in this instance, we think the haircut to value will more than offset these potential benefits (though the market seemed to punish shares a bit less than our implied figures in the day following the announcement).

Even so, we think the stock mostly trades in line with economic value. After taxes, JBT will have an incremental $650 million it can redeploy into new opportunities. We think it will likely deploy the cash into programmatic acquisitions that can help bolster any holes in its food automation portfolio or add higher-margin, recurring revenue to its coffers. In fact, acquisitions add about $3 worth of intrinsic value to our financial model.

As for the quarter, results were broadly in line with our expectations on a continuing operations basis. We were previously modeling AeroTech in continued operations, but have now fully moved it into discontinued operations, consistent with the company’s reporting from now on.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Joshua Aguilar

Sector Director
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Joshua Aguilar is the director of resources equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Aguilar joined Morningstar in 2016 as an associate on the financials team, and he was promoted to analyst on the industrials team in 2018 and to senior analyst in 2022. He has served as associates coordinator since 2021 and led Morningstar's diversity efforts as DEI co-chair since 2020. Aguilar has been a mentor to several associates on their paths to becoming analysts. He also has hosted a Morningstar earnings town hall, participated in analyzing Morningstar stock, and been a strong contributor through both client interactions and his General Electric stock call. Aguilar co-authored an Outstanding Research Achievement-winning piece with colleague Kris Inton on CEO compensation in 2021. He also has taught Morningstar's model to new hires for many years as part of the valuation committee.

Before joining Morningstar, Aguilar was a practicing business transactional attorney in Florida. He graduated magna cum laude with a bachelor's degree in political science and criminology from the University of Florida. He also has a Master of Business Administration from Rollins College and a Juris Doctor from Wake Forest University.

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