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Kennametal's 4Q13 Earnings Beats Est.

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Kennametal Inc. (KMT - Free Report) reported its financial results for the fourth quarter and fiscal year 2013 (ended Jun 30, 2013) on Jul 25, 2013. Adjusted earnings per share in the fourth quarter came in at 76 cents, way below $1.06 earnings reported in the year-ago quarter but above the Zacks Consensus Estimate of 73 cents.

For fiscal year 2013, adjusted earnings per share were $2.49, down from $3.86 reported in the previous year. The results, however, were in-line with the Zacks Consensus Estimate.  


Kennametal reported a 9.2% year-over-year decline in its revenue that settled at $671.4 million in the fourth quarter of fiscal 2013. The decline can be attributed to a fall of 8% in organic revenue and 1% negative impact from foreign currency translation.     

Adjusted revenue in the quarter came in at $614.3 million, down compared with $671.7 million in the year-ago quarter.

A brief discussion on the segments of Kennametal is given below:

Industrial segment generated revenues of $383.7 million in the fourth quarter, down 8.9% from the year-ago quarter as weakness in general engineering, transportation and aerospace and defense impacted results adversely. Moreover, revenues across the Americas, Asia and Europe declined.

Infrastructure segment reported 9.5% year-over-year decline in revenue that came in at $287.7 million. The decline can be attributed to weak results from energy and earthworks markets. On an adjusted basis, Infrastructure revenue in the quarter was $230.5 million, down compared with $250.5 million. Moreover, revenues across the Americas, Asia and Europe declined.

On a geographical basis, revenue in North America plummeted 11.8% year over year to $293.0 million; revenue from Western Europe was $202.2 million, down 7.5% year over year while revenue from Rest of the World was about $176.2 million, down 6.5% year over year.

For the fiscal year 2013, total revenue came in at $2,589.4 million, down 5.4% year over year.


Cost of revenue in the fourth quarter went down 6.7% year over year and represented 65.9% of total revenue; up from 64.2% in the year-ago quarter. Operating expenses, as a percentage of total revenue, stood at 19.8%. Adjusted operating margin in the quarter was 14.6%, down 300 basis points year over year.

Balance Sheet

Exiting the fiscal fourth quarter 2013, cash and cash equivalents of Kennametal stood at $377.3 million compared with $322.1 million in the previous quarter. Long-term debt and capital leases slightly declined to $703.6 million versus $703.9 million in the previous quarter.
Cash Flow

Kennametal reported $284.2 million net cash flow from operating activities in fiscal 2013, down slightly compared with $289.6 million in 2012. Capital expenditure in the year declined to $82.8 million from $103.0 million in 2012. Free cash flow was approximately $204.3 million compared with $193.4 million the previous year.

During fiscal 2013, Kennametal repurchased approximately 3.1 million shares, including 1.0 million share buyback activities carried out in the fourth quarter.

Apart from declaring its financial results, Kennametal’s board of directors approved a 12.5% increase in its quarterly dividend rate. The revised rate of 18 cents will be paid on Aug 21, 2013 to shareholders of record as on Aug 6, 2013.

Also, Kennametal announced its second amended multi-year repurchase program, which now stands at 17 million shares versus 12 million expected earlier. Exiting the fiscal year 2013, roughly 10.4 million shares remained in authorization under the second program.


For fiscal 2014, management of Kennametal anticipates total sales growth to vary within 4%-6% range while organic revenue is predicted to grow within the 5%-7% range. Earnings per share are expected to fall within the $2.90-$3.10 range. At mid-point, the guidance reflects year-over-year increase of 19%.

Kennametal anticipates cash flow from operating activities to range within $330-$380 million, capital expenditure to be within the $130-$150 million range and free cash flow to be within the $200-$230 million range.

Kennametal currently carries a Zacks Rank #3 (Hold). Other stocks to watch out for in the industry are Lincoln Electric Holdings Inc. (LECO - Free Report) , Chart Industries Inc. (GTLS - Free Report) and Gardner Denver Inc. (GDI - Free Report) , each with a Zacks Rank #2 (Buy).

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