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Key Technology's Earnings Jump Fourfold

CMCO HY GRC

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Key Technology, Inc.’s third-quarter 2013 earnings increased more than fourfold to 23 cents per share from 5 cents in the year-ago quarter. Reported earnings also edged out the Zacks Consensus Estimate of 21 cents per share. Total revenue increased 13.9% to $39 million, beating the Zacks Consensus Estimate of $37 million.
 
Cost and Margins
 
Cost of sales increased 8% to $26 million in the quarter. Gross profit went up 27% to $13.3 million. Improved product mix and more efficient plant utilization drove the gross margin higher by 350 basis points year over year to 33.7%.
 
Total operating expenses increased 10% to $11 million. Key Technology reported an operating profit of $28.4 million, up 15% from the year-ago quarter’s operating profit of $24.6 million.
 
Key Technology ended the third quarter with a backlog of $41.7 million compared with $24.3 million at the end of the prior-year quarter. During the quarter, Key Technology was awarded new orders worth $30.9 million, up from $24.9 million in the prior-year quarter. Orders were reported to be strong, particularly in the potato market as well as the dried fruit and nut markets.
 
Financial Updates
 
Cash and cash equivalents were $19.8 million as of Jun 30, 2013 compared with $19.2 million as of Mar 31, 2013. Long-term debt amounted to $5.76 million as of Jun 30, 2013 compared with $5.9 million as of Mar 31, 2013.

Key Technology has entered into an exclusive licensing agreement with EVK and Insort to deploy Chemical Imaging Technology and integrate new hyperspectral developments into Key systems. Furthermore, the company has entered into an exclusive distribution agreement to market Insort's complementary sorting solutions to strategic potato processing customers worldwide.

Key Technology completed the acquisition of Belgium-based Visys NV, a supplier of innovative digital sorters, in Feb 2013. The transaction is expected to be accretive within the first twelve months. The acquisition will increase Key’s share in its core markets, expand into new high-potential markets and accelerate its development of next-generation sorting technologies.

Key Technology’s strong backlog at the end of the third quarter will lead to increased shipments in the fourth quarter of fiscal 2013, as compared to the prior year quarter. However, margins are expected to be affected due to a less favorable product mix in the fourth quarter

Walla Walla, Wash.- based Key Technology, Inc. designs, manufactures, sells and services process automation systems in the United States and internationally. Key Technology currently retains a Zacks Rank #4 (Sell). Among stocks in the industrial products sector, Gorman-Rupp Co. (GRC - Snapshot Report) with a Zacks Rank #1 (Strong Buy) is a stock to watch out for.
 
Peer Performance & Expectations
 
Key Techology’s peer Columbus McKinnon Corp. (CMCO - Snapshot Report) reported earnings of 37 cents in the June ending quarter, a 14% decline from 43 cents in the year-ago quarter. However, the earnings were ahead of the Zacks Consensus Estimate of 33 cents. Hyster-Yale Materials (HY) will report the June ending quarter results on Jul 31, 2013. The Zacks Consensus Estimate currently stands at $1.18, depicting a 1.72% year-over-year increase.
 

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