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Kennametal (KMT) Down 4.7% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Kennametal (KMT - Free Report) . Shares have lost about 4.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Kennametal due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Kennametal Q3 Earnings Miss Estimates, Revenues Down Y/Y
Kennametal reported third-quarter fiscal 2024 (ended Mar 31, 2024) adjusted earnings of 30 cents per share, which missed the Zacks Consensus Estimate of 31 cents. The bottom line decreased 23.1% from the year-ago figure.
Revenue Details
Kennametal’s revenues were $515.8 million, which decreased 3.8% from the year-ago quarter’s figure. Organic sales declined 2% year over year. Business days had a negative impact of 1%. Currency exchange negatively affected sales by 1%.
KMT’s revenues missed the Zacks Consensus Estimate of $525 million.
On a geographical basis, revenues from American operations decreased 6.2% year over year to $252.9 million, whereas sales from Europe, the Middle East and Africa region were $164.2 million, up 0.2% from the year-ago quarter’s reading. Sales from the Asia Pacific belt decreased 3.1% to $98.6 million.
Kennametal reports results under two business segments, namely Metal Cutting and Infrastructure. Its segmental performance for the fiscal third quarter is briefly discussed below:
The Metal Cutting segment’s revenues of $326.6 million decreased 2.1% year over year. Organic sales growth in the quarter was flat. Forex woes had an unfavorable impact of 1% and business days had a negative impact of 1%. The Zacks Consensus Estimate for Metal Cutting’s revenues was pegged at $326 million.
The Infrastructure segment’s revenues totaled $189.2 million, which were down 6.6% year over year. Foreign currency movements had an adverse impact of 1% and unfavorable business days had a negative impact of 1% year over year. Organic sales declined 5% year over year. The consensus estimate for Infrastructure’s revenues was pegged at $196 million.
Margin Profile
Kennametal’s cost of goods sold decreased 1.5% year over year to $362.5 million. The gross profit decreased 8.7% year over year to $153.3 million wherein the margin decreased 160 basis points (bps) to 29.7%. Operating expenses summed $109 million, down 4% year over year.
The operating income decreased 32.9% year over year to $35.2 million. Operating margin decreased 300 bps year over year to 6.8%. Higher wages and general inflation, lower sales volumes and higher raw material costs were spoilsports.
Interest expenses were $6.8 million, down 12.5% from the year-ago quarter’s figure. The adjusted effective tax rate was 26.5%.
Balance Sheet and Cash Flow
While exiting the third quarter of fiscal 2024, Kennametal’s cash and cash equivalents were $92.1 million compared with $106 million reported in fourth-quarter fiscal 2023. Long-term debt was $595.8 million, almost in line with the $595.2 million reported in the fiscal fourth quarter of 2023.
In the first nine months of fiscal 2024, Kennametal generated net cash of $163.5 million in operating activities compared with $126.2 million net cash generated in the previous fiscal year’s quarter. Capital invested in purchasing property, plant and equipment (net of the amount received on disposals) was $84.2 million, up 18.5% from $71.1 million in the prior fiscal year. Free operating cash flow was $84.5 million compared with $59.9 million in the previous fiscal year’s period.
KMT paid a dividend worth $16 million and repurchased shares worth $15 million.
Fiscal 2024 Guidance
For fiscal 2024 (ending June 2024), the company anticipates sales to be in the range of $2.03-$2.05 billion compared with $2.02-$2.07 billion stated before. Adjusted earnings per share are anticipated to be in the range of $1.40-$1.55 compared with $1.35-$1.65 expected before. Free operating cash flow is expected to be more than 125% of net income (adjusted).
Capital spending is expected to be $100-$110 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Kennametal has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Kennametal has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Kennametal (KMT) Down 4.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Kennametal (KMT - Free Report) . Shares have lost about 4.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Kennametal due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Kennametal Q3 Earnings Miss Estimates, Revenues Down Y/Y
Kennametal reported third-quarter fiscal 2024 (ended Mar 31, 2024) adjusted earnings of 30 cents per share, which missed the Zacks Consensus Estimate of 31 cents. The bottom line decreased 23.1% from the year-ago figure.
Revenue Details
Kennametal’s revenues were $515.8 million, which decreased 3.8% from the year-ago quarter’s figure. Organic sales declined 2% year over year. Business days had a negative impact of 1%. Currency exchange negatively affected sales by 1%.
KMT’s revenues missed the Zacks Consensus Estimate of $525 million.
On a geographical basis, revenues from American operations decreased 6.2% year over year to $252.9 million, whereas sales from Europe, the Middle East and Africa region were $164.2 million, up 0.2% from the year-ago quarter’s reading. Sales from the Asia Pacific belt decreased 3.1% to $98.6 million.
Kennametal reports results under two business segments, namely Metal Cutting and Infrastructure. Its segmental performance for the fiscal third quarter is briefly discussed below:
The Metal Cutting segment’s revenues of $326.6 million decreased 2.1% year over year. Organic sales growth in the quarter was flat. Forex woes had an unfavorable impact of 1% and business days had a negative impact of 1%. The Zacks Consensus Estimate for Metal Cutting’s revenues was pegged at $326 million.
The Infrastructure segment’s revenues totaled $189.2 million, which were down 6.6% year over year. Foreign currency movements had an adverse impact of 1% and unfavorable business days had a negative impact of 1% year over year. Organic sales declined 5% year over year. The consensus estimate for Infrastructure’s revenues was pegged at $196 million.
Margin Profile
Kennametal’s cost of goods sold decreased 1.5% year over year to $362.5 million. The gross profit decreased 8.7% year over year to $153.3 million wherein the margin decreased 160 basis points (bps) to 29.7%. Operating expenses summed $109 million, down 4% year over year.
The operating income decreased 32.9% year over year to $35.2 million. Operating margin decreased 300 bps year over year to 6.8%. Higher wages and general inflation, lower sales volumes and higher raw material costs were spoilsports.
Interest expenses were $6.8 million, down 12.5% from the year-ago quarter’s figure. The adjusted effective tax rate was 26.5%.
Balance Sheet and Cash Flow
While exiting the third quarter of fiscal 2024, Kennametal’s cash and cash equivalents were $92.1 million compared with $106 million reported in fourth-quarter fiscal 2023. Long-term debt was $595.8 million, almost in line with the $595.2 million reported in the fiscal fourth quarter of 2023.
In the first nine months of fiscal 2024, Kennametal generated net cash of $163.5 million in operating activities compared with $126.2 million net cash generated in the previous fiscal year’s quarter. Capital invested in purchasing property, plant and equipment (net of the amount received on disposals) was $84.2 million, up 18.5% from $71.1 million in the prior fiscal year. Free operating cash flow was $84.5 million compared with $59.9 million in the previous fiscal year’s period.
KMT paid a dividend worth $16 million and repurchased shares worth $15 million.
Fiscal 2024 Guidance
For fiscal 2024 (ending June 2024), the company anticipates sales to be in the range of $2.03-$2.05 billion compared with $2.02-$2.07 billion stated before. Adjusted earnings per share are anticipated to be in the range of $1.40-$1.55 compared with $1.35-$1.65 expected before. Free operating cash flow is expected to be more than 125% of net income (adjusted).
Capital spending is expected to be $100-$110 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Kennametal has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Kennametal has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.