Can A Spinoff Boost Timken Stock?

With shares of Timken (NYSE:TKR) trading around $61, is TKR an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework.

T = Trends for a Stock’s Movement

Timken develops, manufactures, markets, and sells products for friction management and mechanical power transmission, as well as alloy steels and steel components. Timken manufactures and manages global supply chains for two core product lines: anti-friction bearings and adjacent mechanical power transmission components, in addition to specialty steel and related precision steel components. Its products and services include bearings and power transmission, tapered roller bearings, precision cylindrical and ball bearings, spherical and cylindrical roller bearings, chains and augers, gear-drive systems, aerospace products and services, and steel and precision steel components.

Timken is bowing under pressure to split its steel and bearings businesses. A shareholder vote and a Goldman Sachs (NYSE:GS) review both favored a spinoff of the company’s steel business, Bloomberg reports. Ward Timken will be the chairman and CEO of the new steel company, and Richard Kyle will be president and CEO of the bearings and power transmission company.

T = Technicals on the Stock Chart Are Strong

Timken stock has been surging higher over the past several quarters. The stock is currently trading near all-time high prices and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Timken is trading above its rising key averages, which signals neutral to bullish price action in the near term.

TKR

Source: Thinkorswim