We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Kennametal (KMT) Misses Q1 Earnings & Revenues; View Up
Read MoreHide Full Article
Machinery company Kennametal Inc.’s (KMT - Free Report) results were disappointing for first-quarter fiscal 2017 (ended Sep 30, 2016). The company’s adjusted earnings of 11 cents per share lagged the Zacks Consensus Estimate of 14 cents by 21.4%. Also, the bottom line fell 21.4% from the year-ago tally of 14 cents.
The company’s share price has fallen roughly 6.68% since the earnings announcement on Oct 26.
Kennametal’s first quarter revenues totaled $477.1 million, below the Zacks Consensus Estimate of $481 million. On a year-over-year basis, the top line decreased 14.1%. The year-over-year fall was triggered by a 3% decline in organic revenues, 2% adverse impact from foreign currency translation and 9% divestiture-related losses.
On a geographical basis, Kennametal generated sales of $215.2 million from its North American operations, decreasing 15% year over year. Business in Western Europe remained weak, with revenues of $120 million, declining 23% year over year. Revenues sourced from Rest of the World fell 3.1% year over year to $141.9 million.
Segmental Details
Effective from the start of fiscal 2017, Kennametal Inc. revised its reporting segments from the previously two segments, Industrial and Infrastructure, to three segments viz. Industrial, WIDIA and Infrastructure. The company’s segmental performance is briefly discussed below:
The Industrial segment’s net sales in the quarter were $269 million, roughly flat year over year. Organic revenues growth of 3% was offset by 2% negative impact from foreign currency translation and 1% negative impact from divestitures.
Organic sales in aerospace & defense, general engineering and transportation end markets increased, while it decreased in energy end market. On a geographical basis, revenues grew 7% in Asia and 4% in the Americas, offset by 1% decline in Europe.
The WIDIA segment’s revenue totaled $41 million, down 4.9% year over year. The decline was due to 3% fall in organic revenues, 1% adverse impact from fewer business days and 1% negative impact from foreign currency translation. On a geographical basis, revenues fell 10% in Europe and 5% in the Americas, offset by 5% gain in Asia.
The Infrastructure segment’s revenue totaled $167.1 million, down 31% year over year. The decline was due to 10% fall in organic revenues, 20% adverse impact from divestiture and 1% negative impact from foreign currency translation.
Organic revenues declined due to weak sales in energy, earthworks and general engineering end markets. Geographically, revenues fell 16% in the Americas, 8% in Asia and 3% in Europe.
Margins
In the quarter, Kennametal’s adjusted cost of goods sold decreased 7.6% year over year, representing 69.5% of total revenue compared with 71.2% in the year-ago quarter. Adjusted gross margin improved 170 basis points (bps) to 30.5%.
Adjusted operating expense, as a percentage of total revenue, was 24.9%, up 130 bps year over year. Adjusted operating margin grew 40 bps year over year to 4.7%.
Balance Sheet and Cash Flow
Exiting the first quarter, Kennametal had cash and cash equivalents of $119.4 million, down from $161.6 million at the previous quarter-end. Long-term debt and capital leases were $694 million versus $700 million in the previous quarter.
In the quarter, Kennametal used net cash of $19.3 million from its operating activities versus $3.4 million generated in the year-ago quarter. Capital spending was $42.3 million compared with $37.2 million in first-quarter fiscal 2016. Free operating cash outflow in the quarter was $19.3 million versus $3.4 million in the year-ago quarter.
Concurrent with the earnings release, Kennametal announced that its board of directors has approved a quarterly cash dividend of 20 cents per share, payable on Nov 29 to shareholders of record as on Nov 11.
Outlook
For fiscal 2017, Kennametal anticipates total revenue to be flat compared with roughly $2 billion generated in fiscal 2016. Organic revenue is projected to decline 2% to grow roughly 2%. Adjusted earnings are expected within $1.20−$1.50 from the previous projection of $1.10−$1.40 per share. Effective tax rate will be within 20−25% range versus 13−17% expected earlier.
Cash flow from operating activities is projected in a range of $215−$245 million, up from $190−$230 million expected earlier, while capital spending is anticipated within $125−$135 million versus the earlier projected range of $100−$120 million. Free cash flow will likely come in a band of $90−$110 million.
The company anticipates its restructuring programs, including headcount reductions initiatives and others, to yield pre-tax savings of approximately $140−$155 million by Dec 2018, while savings related to these initiatives will likely be $155−$175 million.
Of these programs, the company predicts its headcount reduction initiatives to result in estimated annualized savings of $65 million by Jun 2017. Related charges will be roughly $50 million. In addition, the other programs are likely to generate savings of $75−$90 million by Dec 2018. Related charges will be $105−$125 million.
Applied Industrial Technologies’ earnings estimates for fiscal 2017 and fiscal 2018 represent year-over-year growth of 2% and 5.9% respectively. Average earnings surprise for the last four quarters is +4.93%.
Barnes Group reported better-than-expected results in the last quarter, with a positive earnings surprise of 6.78%. Also, bottom-line expectations for 2017 have improved over the past 60 days.
Chart Industries’ financial performance has been impressive, with an average positive earnings surprise of 428.37% for the last four quarters. Also, earnings estimates for 2016 and 2017 have been revised upward over the last 60 days.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Kennametal (KMT) Misses Q1 Earnings & Revenues; View Up
Machinery company Kennametal Inc.’s (KMT - Free Report) results were disappointing for first-quarter fiscal 2017 (ended Sep 30, 2016). The company’s adjusted earnings of 11 cents per share lagged the Zacks Consensus Estimate of 14 cents by 21.4%. Also, the bottom line fell 21.4% from the year-ago tally of 14 cents.
The company’s share price has fallen roughly 6.68% since the earnings announcement on Oct 26.
Kennametal’s first quarter revenues totaled $477.1 million, below the Zacks Consensus Estimate of $481 million. On a year-over-year basis, the top line decreased 14.1%. The year-over-year fall was triggered by a 3% decline in organic revenues, 2% adverse impact from foreign currency translation and 9% divestiture-related losses.
On a geographical basis, Kennametal generated sales of $215.2 million from its North American operations, decreasing 15% year over year. Business in Western Europe remained weak, with revenues of $120 million, declining 23% year over year. Revenues sourced from Rest of the World fell 3.1% year over year to $141.9 million.
Segmental Details
Effective from the start of fiscal 2017, Kennametal Inc. revised its reporting segments from the previously two segments, Industrial and Infrastructure, to three segments viz. Industrial, WIDIA and Infrastructure. The company’s segmental performance is briefly discussed below:
The Industrial segment’s net sales in the quarter were $269 million, roughly flat year over year. Organic revenues growth of 3% was offset by 2% negative impact from foreign currency translation and 1% negative impact from divestitures.
Organic sales in aerospace & defense, general engineering and transportation end markets increased, while it decreased in energy end market. On a geographical basis, revenues grew 7% in Asia and 4% in the Americas, offset by 1% decline in Europe.
The WIDIA segment’s revenue totaled $41 million, down 4.9% year over year. The decline was due to 3% fall in organic revenues, 1% adverse impact from fewer business days and 1% negative impact from foreign currency translation. On a geographical basis, revenues fell 10% in Europe and 5% in the Americas, offset by 5% gain in Asia.
The Infrastructure segment’s revenue totaled $167.1 million, down 31% year over year. The decline was due to 10% fall in organic revenues, 20% adverse impact from divestiture and 1% negative impact from foreign currency translation.
Organic revenues declined due to weak sales in energy, earthworks and general engineering end markets. Geographically, revenues fell 16% in the Americas, 8% in Asia and 3% in Europe.
Margins
In the quarter, Kennametal’s adjusted cost of goods sold decreased 7.6% year over year, representing 69.5% of total revenue compared with 71.2% in the year-ago quarter. Adjusted gross margin improved 170 basis points (bps) to 30.5%.
Adjusted operating expense, as a percentage of total revenue, was 24.9%, up 130 bps year over year. Adjusted operating margin grew 40 bps year over year to 4.7%.
Balance Sheet and Cash Flow
Exiting the first quarter, Kennametal had cash and cash equivalents of $119.4 million, down from $161.6 million at the previous quarter-end. Long-term debt and capital leases were $694 million versus $700 million in the previous quarter.
In the quarter, Kennametal used net cash of $19.3 million from its operating activities versus $3.4 million generated in the year-ago quarter. Capital spending was $42.3 million compared with $37.2 million in first-quarter fiscal 2016. Free operating cash outflow in the quarter was $19.3 million versus $3.4 million in the year-ago quarter.
Concurrent with the earnings release, Kennametal announced that its board of directors has approved a quarterly cash dividend of 20 cents per share, payable on Nov 29 to shareholders of record as on Nov 11.
Outlook
For fiscal 2017, Kennametal anticipates total revenue to be flat compared with roughly $2 billion generated in fiscal 2016. Organic revenue is projected to decline 2% to grow roughly 2%. Adjusted earnings are expected within $1.20−$1.50 from the previous projection of $1.10−$1.40 per share. Effective tax rate will be within 20−25% range versus 13−17% expected earlier.
Cash flow from operating activities is projected in a range of $215−$245 million, up from $190−$230 million expected earlier, while capital spending is anticipated within $125−$135 million versus the earlier projected range of $100−$120 million. Free cash flow will likely come in a band of $90−$110 million.
The company anticipates its restructuring programs, including headcount reductions initiatives and others, to yield pre-tax savings of approximately $140−$155 million by Dec 2018, while savings related to these initiatives will likely be $155−$175 million.
Of these programs, the company predicts its headcount reduction initiatives to result in estimated annualized savings of $65 million by Jun 2017. Related charges will be roughly $50 million. In addition, the other programs are likely to generate savings of $75−$90 million by Dec 2018. Related charges will be $105−$125 million.
KENNAMETAL INC Price, Consensus and EPS Surprise
KENNAMETAL INC Price, Consensus and EPS Surprise | KENNAMETAL INC Quote
Zacks Rank & Stocks to Consider
With a market capitalization of $2.15 billion, Kennametal currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the machinery industry include Applied Industrial Technologies, Inc. (AIT - Free Report) , Barnes Group (B - Free Report) and Chart Industries Inc. (GTLS - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Applied Industrial Technologies’ earnings estimates for fiscal 2017 and fiscal 2018 represent year-over-year growth of 2% and 5.9% respectively. Average earnings surprise for the last four quarters is +4.93%.
Barnes Group reported better-than-expected results in the last quarter, with a positive earnings surprise of 6.78%. Also, bottom-line expectations for 2017 have improved over the past 60 days.
Chart Industries’ financial performance has been impressive, with an average positive earnings surprise of 428.37% for the last four quarters. Also, earnings estimates for 2016 and 2017 have been revised upward over the last 60 days.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>