Summary

•Timken reported a great quarter early Wednesday morning.

•The company has raised its guide for next year - the second time in as many months to raise FY guidance - to $3.90.

•TKR is a rock solid century old dividend payer that deserves a P/E of 15 and short-term share price appreciation of about 40%.

•TKR 2018 estimates have gone from $3-$3.90 in five months and in the same time shares are lower by 20%, trading with a P/E of about 10 - insanely cheap.
Timken (TKR) was out with earnings this morning that punched out the Street's expectations, posting EPS of $1.02 vs. estimates of $0.87 and revenue of $883.1 million, which beat by over $40 million. The company also upped its guidance for the upcoming year - the second time it has raised guidance in as many months - and Timken now expects 2018 GAAP earnings per diluted share of $3.80 to $3.90 and adjusted earnings per diluted share of $3.90 to $4.00.

The stock hardly responding in trading, making it still cheap considering the fact that the company was trading closer to $50 before the recent market volatility and before it raised guidance twice. Since January, the company's 2018 EPS estimates have gone from $3.00 to $3.30, then to $3.60, to now being $3.90-$4.00. In the same time period, the stock is down almost 20%. Timken is now officially a bargain.

Based on the company's new guidance and a P/E of 15 (which is still quite conservative, considering many century old dividend paying blue chips are priced at P/E's of 20 and above in this market), Timken shares could have short term 40% upside and even further upside over the longer term. It's also worth noting that TKR's are fully diluted GAAP numbers, so there's little to no room to be "turning knobs to change EPS," as Ubiquti Network's CEO once put it.

The company stated in its press release that it had a positive Q1 due to organic growth, acquisitions and FX tailwinds:

“The increase was driven by strong organic growth across most end-market sectors led by industrial distribution and off-highway, as well as the benefit of acquisitions and currency.