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.
Machinery company Kennametal Inc. (KMT - Free Report) reported lower-than-expected results for second-quarter fiscal 2018 (ended Dec 31, 2017).
Adjusted earnings in the quarter came in at 52 cents per share, lagging the Zacks Consensus Estimate of 53 cents by 1.9%.
On a year-over-year basis, the bottom line increased 116.7% from the year-ago tally of 24 cents. The bottom line benefitted from healthy organic sales, favorable mix, margin improvement and lower taxes.
Organic and Forex Gains Drive Revenues
In the quarter, Kennametal’s revenues totaled $571.3 million, surpassing the Zacks Consensus Estimate of $534.9 million by 6.8%. Also, the top line increased 17.2% year over year on the back of 15% organic revenue growth and 3% positive foreign currency impact. This was partially offset by 1% negative impact of fewer business days.
On a geographical basis, the company generated sales of $275.5 million from its American operations, increasing 15.7% year over year. Sales in Europe, Middle East and Africa (EMEA) grew 16.3% to $174.6 million while that generated from Asia Pacific operations increased 22% to $121.2 million.
The company reports its revenue results under three segments viz. Industrial, WIDIA and Infrastructure. The company’s segmental performance in the fiscal second quarter is briefly discussed below:
Industrial net sales were $312.4 million, increasing 16.8% year over year. Organic revenues grew 14% and foreign currency translation had a positive 4% impact. Lower business days had an adverse 1% impact.
Organic sales in energy, general engineering, aerospace & defense and transportation increased. On a geographical basis, revenues jumped 20% in Asia Pacific, 11% in the Americas and 11% in EMEA.
WIDIA revenues totaled $47.7 million, up 11.4% year over year. The year-over-year growth was driven by 9% increase in organic revenues and 2% positive impact from foreign currency movements. On a geographical basis, revenues grew 4% in Asia Pacific, 8% in the Americas and 16% in EMEA.
Infrastructure revenues totaled $211.2 million, increasing 19.2% year over year. The improvement was due to 18% organic revenue growth and 2% positive impact from foreign currency movements. This was partially offset by 1% negative impact from fewer business days.
Organic revenues increased in energy, earthworks and general engineering end markets. Geographically, revenues rose 24% in Asia Pacific, 20% in the Americas and 1% in EMEA.
Falling Costs Proportion Boosts Margins
Kennametal’s adjusted cost of goods sold in the quarter grew 11.9% year over year, representing 66.1% of total revenues compared with 69.2% in the year-ago quarter. Adjusted gross margin increased 310 basis points (bps) to 33.9%.
Adjusted operating expenses, as a percentage of total revenues, was 21.2%, down 150 bps year over year. Adjusted operating margin grew 490 bps year over year to 12.2% on the back of higher sales, favorable mix, fixed-cost absorption and improved productivity.
Balance Sheet and Cash Flow
Exiting the fiscal second quarter, Kennametal had cash and cash equivalents of $159.9 million, above $110.7 million at the previous quarter end. Long-term debt and capital leases were roughly flat sequentially at $695 million.
In the quarter, the company generated net cash of $86.6 million from its operating activities, up from $25.1 million generated in the year-ago quarter. Capital spending grew 52.3% to $43.1 million. Free cash in the quarter was $43.9 million.
Concurrent with the earlier release, the company announced that its board of directors approved payment of a quarterly cash dividend of 20 cents per share to shareholders on record as of Feb 13, 2018. The dividend will be paid on Feb 28.
Outlook
For fiscal 2018, Kennametal raised its adjusted earnings per share guidance to $2.40-$2.70 from the previous projection of $2.30-$2.60. The bottom line will benefit from organic sales growth of 9-11% (up from the earlier forecast of 5-7%) while will be negatively impacted by 15-20 cents per share of charge related to the U.S. tax reform.
Tax rate will likely be 22-25% (higher than 18-22% expected earlier) while capital expenditure is expected to be within $210-$230 million. Free cash is projected to be in a range of $0-$30 million versus the prior projection of $0-$20 million.
As noted, the company is on track to realize benefits from its modernization and end-to-end initiatives.
With a market capitalization of $4 billion, Kennametal carries a Zacks Rank #3 (Hold). Some better-ranked in the machinery industry are Colfax Corporation , Lincoln Electric Holdings, Inc. (LECO - Free Report) and Sandvik AB (SDVKY - Free Report) . While Colfax sports a Zacks Rank #1 (Strong Buy), both Lincoln Electric and Sandvik carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Colfax’s earnings estimates for 2018 improved in the last 60 days. The company pulled off an average positive earnings surprise of 5.31% in the last four quarters.
Lincoln Electric’s financial performance was impressive, with an average positive earnings surprise of 3.65% in the last four quarters. Also, earnings estimates for 2018 were revised upward over the last 60 days.
Sandvik’s earnings estimates for 2018 were revised upward in the last 60 days.
Breaking News: Cryptocurrencies Now Bigger than Visa
The total market cap of all cryptos recently surpassed $700 billion – more than a 3,800% increase in the previous 12 months. They’re now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.
Zacks’ has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.
Image: Bigstock
Kennametal (KMT) Lags Q2 Earnings, Tops Sales, Ups FY18 View
Machinery company Kennametal Inc. (KMT - Free Report) reported lower-than-expected results for second-quarter fiscal 2018 (ended Dec 31, 2017).
Adjusted earnings in the quarter came in at 52 cents per share, lagging the Zacks Consensus Estimate of 53 cents by 1.9%.
On a year-over-year basis, the bottom line increased 116.7% from the year-ago tally of 24 cents. The bottom line benefitted from healthy organic sales, favorable mix, margin improvement and lower taxes.
Organic and Forex Gains Drive Revenues
In the quarter, Kennametal’s revenues totaled $571.3 million, surpassing the Zacks Consensus Estimate of $534.9 million by 6.8%. Also, the top line increased 17.2% year over year on the back of 15% organic revenue growth and 3% positive foreign currency impact. This was partially offset by 1% negative impact of fewer business days.
On a geographical basis, the company generated sales of $275.5 million from its American operations, increasing 15.7% year over year. Sales in Europe, Middle East and Africa (EMEA) grew 16.3% to $174.6 million while that generated from Asia Pacific operations increased 22% to $121.2 million.
The company reports its revenue results under three segments viz. Industrial, WIDIA and Infrastructure. The company’s segmental performance in the fiscal second quarter is briefly discussed below:
Industrial net sales were $312.4 million, increasing 16.8% year over year. Organic revenues grew 14% and foreign currency translation had a positive 4% impact. Lower business days had an adverse 1% impact.
Organic sales in energy, general engineering, aerospace & defense and transportation increased. On a geographical basis, revenues jumped 20% in Asia Pacific, 11% in the Americas and 11% in EMEA.
WIDIA revenues totaled $47.7 million, up 11.4% year over year. The year-over-year growth was driven by 9% increase in organic revenues and 2% positive impact from foreign currency movements. On a geographical basis, revenues grew 4% in Asia Pacific, 8% in the Americas and 16% in EMEA.
Infrastructure revenues totaled $211.2 million, increasing 19.2% year over year. The improvement was due to 18% organic revenue growth and 2% positive impact from foreign currency movements. This was partially offset by 1% negative impact from fewer business days.
Organic revenues increased in energy, earthworks and general engineering end markets. Geographically, revenues rose 24% in Asia Pacific, 20% in the Americas and 1% in EMEA.
Falling Costs Proportion Boosts Margins
Kennametal’s adjusted cost of goods sold in the quarter grew 11.9% year over year, representing 66.1% of total revenues compared with 69.2% in the year-ago quarter. Adjusted gross margin increased 310 basis points (bps) to 33.9%.
Adjusted operating expenses, as a percentage of total revenues, was 21.2%, down 150 bps year over year. Adjusted operating margin grew 490 bps year over year to 12.2% on the back of higher sales, favorable mix, fixed-cost absorption and improved productivity.
Balance Sheet and Cash Flow
Exiting the fiscal second quarter, Kennametal had cash and cash equivalents of $159.9 million, above $110.7 million at the previous quarter end. Long-term debt and capital leases were roughly flat sequentially at $695 million.
In the quarter, the company generated net cash of $86.6 million from its operating activities, up from $25.1 million generated in the year-ago quarter. Capital spending grew 52.3% to $43.1 million. Free cash in the quarter was $43.9 million.
Concurrent with the earlier release, the company announced that its board of directors approved payment of a quarterly cash dividend of 20 cents per share to shareholders on record as of Feb 13, 2018. The dividend will be paid on Feb 28.
Outlook
For fiscal 2018, Kennametal raised its adjusted earnings per share guidance to $2.40-$2.70 from the previous projection of $2.30-$2.60. The bottom line will benefit from organic sales growth of 9-11% (up from the earlier forecast of 5-7%) while will be negatively impacted by 15-20 cents per share of charge related to the U.S. tax reform.
Tax rate will likely be 22-25% (higher than 18-22% expected earlier) while capital expenditure is expected to be within $210-$230 million. Free cash is projected to be in a range of $0-$30 million versus the prior projection of $0-$20 million.
As noted, the company is on track to realize benefits from its modernization and end-to-end initiatives.
Kennametal Inc. Price, Consensus and EPS Surprise
Kennametal Inc. Price, Consensus and EPS Surprise | Kennametal Inc. Quote
Zacks Rank & Key Picks
With a market capitalization of $4 billion, Kennametal carries a Zacks Rank #3 (Hold). Some better-ranked in the machinery industry are Colfax Corporation , Lincoln Electric Holdings, Inc. (LECO - Free Report) and Sandvik AB (SDVKY - Free Report) . While Colfax sports a Zacks Rank #1 (Strong Buy), both Lincoln Electric and Sandvik carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Colfax’s earnings estimates for 2018 improved in the last 60 days. The company pulled off an average positive earnings surprise of 5.31% in the last four quarters.
Lincoln Electric’s financial performance was impressive, with an average positive earnings surprise of 3.65% in the last four quarters. Also, earnings estimates for 2018 were revised upward over the last 60 days.
Sandvik’s earnings estimates for 2018 were revised upward in the last 60 days.
Breaking News: Cryptocurrencies Now Bigger than Visa
The total market cap of all cryptos recently surpassed $700 billion – more than a 3,800% increase in the previous 12 months. They’re now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.
Zacks’ has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.
Click here to access these stocks. >>