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Reasons Why You Better Avoid Investing in Kennametal (KMT) Now
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Kennametal Inc. (KMT - Free Report) gains from its diversified business structure, focus on product innovation and measures to lower costs. However, its momentum is subdued due to the presence of end-market challenges caused by the pandemic. The company presently carries a Zacks Rank #4 (Sell).
Kennametal is a specialist in making and distributing high-speed metal cutting tools, tooling systems, and wear-resistant parts. It is based in Latrobe, PA, and currently has a market capitalization of $3 billion.
Year to date, Kennametal’s shares have declined 1.7% compared with the industry’s fall of 6.7% during the same timeframe.
Below we have discussed it is better to avoid investing in Kennametal stock now.
Performance and Pandemic Woes: In first-quarter fiscal 2021 (ended Sep 30, 2020), Kennametal faced headwinds from end-market challenges caused by the pandemic. Its organic sales in the quarter declined 21% year over year due to weakness in general engineering, aerospace, energy, transportation and earthwork markets.
Lingering impacts of end-market challenges related to the pandemic is concerning for Kennametal. As such, the company refrained from providing projections for fiscal 2021 (ending June 2021).
The Zacks Consensus Estimate for revenues in the second quarter of fiscal 2021 (ending December 2020) is pegged at $425.1 million, suggesting a decline of 15.8% from the year-ago reported figure. Also, estimates for fiscal 2021 at $1.75 billion suggest a year-over-year decline of 7.2%.
Restructuring Charges: Over the past few quarters, Kennametal’s margins are suffering from charges related to restructuring activities. In first-quarter fiscal 2021, the company recorded $29 million of charges related to simplification/modernization initiatives. For fiscal 2021, Kennametal predicts pre-tax charges of $90-$100 million related to simplification/modernization initiatives.
Risks From International Operations: The company operates in multiple geographical locations, including Africa, the Middle East, the Americas, Europe and the Asia Pacific. Due to such geographical presence, it is exposed to risks arising from unfavorable movements in foreign currencies, geopolitical issues and others.
In first-quarter fiscal 2021, the company’s sales were down 7% in the Asia Pacific, while for the Americas’ it went down 31% on a year-over-year basis. Also, sales in the Europe, the Middle East and Africa region decreased 20% from the year-ago quarter.
Earnings Estimate Trend: In the past 30 days, the company’s earnings estimates have been lowered, reflecting bearish sentiments for its prospects. Notably, the Zacks Consensus Estimate for earnings is pegged at 79 cents for fiscal 2021 (ending June 2021) and $1.58 for fiscal 2022 (ending June 2022), suggesting declines of 18.6% and 6.5% from the respective 30-day-ago figures.
For fiscal 2021 and 2022, there are five and four downward revisions, respectively, as compared with one upward revision each for the years.
Also, the estimate for the current quarter (ending December 2020) is pegged at 8 cents, reflecting a 50% decline from the 30-day-ago figure. Notably, four downward and one upward revision have been recorded in the past month.
Stocks to Consider
Some better-ranked stocks in the sector are Altra Industrial Motion Corp. , Applied Industrial Technologies, Inc. (AIT - Free Report) and Graco Inc. (GGG - Free Report) . While Altra Industrial sports a Zacks Rank #1 (Strong Buy), both Applied Industrial and Graco carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for these companies have improved for the current year. Also, positive earnings surprise for the last reported quarter was 77.55% for Altra Industrial, 39.06% for Applied Industrial and 40.48% for Graco.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Reasons Why You Better Avoid Investing in Kennametal (KMT) Now
Kennametal Inc. (KMT - Free Report) gains from its diversified business structure, focus on product innovation and measures to lower costs. However, its momentum is subdued due to the presence of end-market challenges caused by the pandemic. The company presently carries a Zacks Rank #4 (Sell).
Kennametal is a specialist in making and distributing high-speed metal cutting tools, tooling systems, and wear-resistant parts. It is based in Latrobe, PA, and currently has a market capitalization of $3 billion.
It belongs to the Zacks Manufacturing – Tools & Related Products industry, which comes under the ambit of the Zacks Industrial Products sector. The industry is in the bottom 3% (with a rank of 247) of more than 250 Zacks industries.
Year to date, Kennametal’s shares have declined 1.7% compared with the industry’s fall of 6.7% during the same timeframe.
Below we have discussed it is better to avoid investing in Kennametal stock now.
Performance and Pandemic Woes: In first-quarter fiscal 2021 (ended Sep 30, 2020), Kennametal faced headwinds from end-market challenges caused by the pandemic. Its organic sales in the quarter declined 21% year over year due to weakness in general engineering, aerospace, energy, transportation and earthwork markets.
Lingering impacts of end-market challenges related to the pandemic is concerning for Kennametal. As such, the company refrained from providing projections for fiscal 2021 (ending June 2021).
The Zacks Consensus Estimate for revenues in the second quarter of fiscal 2021 (ending December 2020) is pegged at $425.1 million, suggesting a decline of 15.8% from the year-ago reported figure. Also, estimates for fiscal 2021 at $1.75 billion suggest a year-over-year decline of 7.2%.
Restructuring Charges: Over the past few quarters, Kennametal’s margins are suffering from charges related to restructuring activities. In first-quarter fiscal 2021, the company recorded $29 million of charges related to simplification/modernization initiatives. For fiscal 2021, Kennametal predicts pre-tax charges of $90-$100 million related to simplification/modernization initiatives.
Risks From International Operations: The company operates in multiple geographical locations, including Africa, the Middle East, the Americas, Europe and the Asia Pacific. Due to such geographical presence, it is exposed to risks arising from unfavorable movements in foreign currencies, geopolitical issues and others.
In first-quarter fiscal 2021, the company’s sales were down 7% in the Asia Pacific, while for the Americas’ it went down 31% on a year-over-year basis. Also, sales in the Europe, the Middle East and Africa region decreased 20% from the year-ago quarter.
Earnings Estimate Trend: In the past 30 days, the company’s earnings estimates have been lowered, reflecting bearish sentiments for its prospects. Notably, the Zacks Consensus Estimate for earnings is pegged at 79 cents for fiscal 2021 (ending June 2021) and $1.58 for fiscal 2022 (ending June 2022), suggesting declines of 18.6% and 6.5% from the respective 30-day-ago figures.
For fiscal 2021 and 2022, there are five and four downward revisions, respectively, as compared with one upward revision each for the years.
Kennametal Inc. Price and Consensus
Kennametal Inc. price-consensus-chart | Kennametal Inc. Quote
Also, the estimate for the current quarter (ending December 2020) is pegged at 8 cents, reflecting a 50% decline from the 30-day-ago figure. Notably, four downward and one upward revision have been recorded in the past month.
Stocks to Consider
Some better-ranked stocks in the sector are Altra Industrial Motion Corp. , Applied Industrial Technologies, Inc. (AIT - Free Report) and Graco Inc. (GGG - Free Report) . While Altra Industrial sports a Zacks Rank #1 (Strong Buy), both Applied Industrial and Graco carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for these companies have improved for the current year. Also, positive earnings surprise for the last reported quarter was 77.55% for Altra Industrial, 39.06% for Applied Industrial and 40.48% for Graco.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>