Back to top

Image: Bigstock

Reasons Why it is Worth Investing in Kadant (KAI) Stock Now

Read MoreHide Full Article

Kadant Inc. (KAI - Free Report) seems to be an attractive investment option for investors seeking exposure in the manufacturing space. Solid fundamentals and growth prospects, impressive financial results, and upward revision in earnings estimates support the stock’s investment appeal. It presently sports a Zacks Rank #1 (Strong Buy).

The company currently has a market capitalization of $2.5 billion. It engages in making and providing engineered systems and components for use in process industries. It belongs to the Zacks Manufacturing - General Industrial industry, which comes under the ambit of the Zacks Industrial Products sector. The industry is among the top 26% (with the rank of 65) of more than 250 Zacks industries.

In the past three months, the company’s shares have gained 27.1% compared with the industry’s growth of 1.7%. The S&P 500 has expanded 7.8%, whereas the sector has advanced 4.3% in the same timeframe.

Zacks Investment Research
Image Source: Zacks Investment Research

Below we discussed why Kadant is a worthy investment option.

Performance and Projections: The company delivered better-than-expected results in the second quarter of 2021, with an earnings beat of 33.11%. It sales beat in the quarter was 9.96%. On a year-over-year basis, the bottom line expanded 89.6% and the top line increased 28.1%.

Solid portfolio of products and recovery in economic activities are benefiting the company. Order activities are sound, as evident from 60% year-over-year growth in bookings in the second quarter. Surge in e-commerce business, focus on digitization, healthy demand for sustainable materials and infrastructural development are also beneficial. For 2021, the company anticipates revenues to be $783-$793 million, higher than $710-$730 million mentioned previously.

The Zacks Consensus Estimate for the company’s revenues is $793.2 million for 2021 and $889.1 million for 2022, indicating increases of 24.9% and 12.1%, respectively, from the previous year’s reported numbers. The consensus estimate for the third quarter is $197.1 million, implying rise of 27.5% from the year-ago quarter.

Diversified Operations & Buyouts: The company has operations in various industries, including packaging, metals, foods, tissue, alternative fuels, mining, waste management, and others. Region wise, the company has operations in North America, China, Europe, South America, and others. Majority of the revenues are sourced from activities in North America.

Benefits in one or more markets/locations help in offsetting weakness in other markets/locations.

Kadant is leveraging benefits from its buyout activities. In August 2021, the company acquired Balemaster for $54 million. Balemaster is a leading manufacturer of balers and other automated waste-handling equipment in the United States. This buyout is expected to complement Kadant’s existing baler production business and will be grouped under the Material Handling segment.

In the third quarter of 2021, Kadant acquired Joh. Clouth GmbH & Co. KG along with its affiliates for $92 million. The buyout was accomplished by Kadant’s subsidiary, Kadant Germany Holding GmbH. The acquired doctor blades and other related equipment manufacturer is integrated with Kadant’s Flow Control segment.

Shareholders’ Rewards: Kadant believes in rewarding shareholders with dividend payouts. In the first half of 2021, the company paid out $5.7 million as dividends to its shareholders. The quarterly dividend rate was hiked by 4.2% or 1 cent to 25 cents per share in March 2021.

The company’s board of directors authorized a share buyback program of $20 million in May 2021. No buybacks have been made under this program for now.

Earnings Estimate Revisions: The company’s earnings estimates have increased in the past 60 days. Currently, the Zacks Consensus Estimate for earnings is pegged at $1.64 for the third quarter of 2021, mirroring an increase of 8.6% from the 60-day-ago figure. Two upward revisions and one downward revision in estimates were recorded for the third quarter.

Kadant Inc Price and Consensus

Kadant Inc Price and Consensus

Kadant Inc price-consensus-chart | Kadant Inc Quote

Also, earnings estimates are pegged at $7.41 for 2021 and $8.81 for 2022, suggesting increases of 22.1% and 32.1% from the 60-day-ago figures, respectively. Four upward revisions in estimates were recorded for both 2021 and 2022 in the past 60 days.

Other Key Picks

Some other top-ranked stocks in the industry are Helios Technologies, Inc. (HLIO - Free Report) , Applied Industrial Technologies, Inc. (AIT - Free Report) , and Dover Corporation (DOV - Free Report) . While Helios currently sports a Zacks Rank #1, Applied Industrial and Dover 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 the companies improved for the current year. Further, the earnings surprise for the last reported quarter was 39.53% for Helios, 27.97% for Applied Industrial and 11.96% for Dover.

Published in