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Kennametal (KMT) Q1 Earnings Miss Estimates, Revenues Up Y/Y
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Kennametal Inc. (KMT - Free Report) reported mixed results for first-quarter fiscal 2023 (ended Sep 30, 2022). The company’s earnings missed the Zacks Consensus Estimate by 8.1%. However, quarterly sales beat estimates by 1.4%.
Adjusted earnings in the quarter under review came in at 43 cents per share, missing the Zacks Consensus Estimate of 37 cents. The bottom line decreased 22.7% from the year-ago figure.
Revenue Details
In the quarter under review, Kennametal’s revenues were $495 million, reflecting an increase of 2% from the year-ago quarter. Revenues beat the Zacks Consensus Estimate of $488 million.
Organic sales in the quarter grew 9%. Foreign currency headwind left an adverse impact of 7%. Business in energy, general engineering, transportation, aerospace and earthworks markets flourished in the quarter.
On a geographical basis, KMT’s revenues from American operations increased 12.4% year over year to $253.6 million, whereas sales from Europe, the Middle East and Africa region were $131.3 million, down 11.5% from the year-ago quarter. Sales from the Asia Pacific belt increased 0.5% to $109.9 million.
Kennametal reports results under two business segments, namely Metal Cutting and Infrastructure. The company’s segmental performance for the fiscal third quarter is briefly discussed below:
Metal Cutting revenues of $300 million were up 1% year over year. Organic sales growth in the quarter was 9%. Forex woes had an adverse impact of 8%.
Infrastructure revenues totaled $195 million, increasing 5% year over year. The results gained from 10% growth in organic sales, while foreign currency movement had an adverse impact of 5%.
Kennametal’s cost of goods sold in the reported quarter increased 3.7% year over year to $334.8 million. The same represented 67.7% of revenues compared with 66.8% in the year-ago quarter.
The gross profit decreased 0.5% year over year to $160 million, wherein the margin contracted 100 basis points (bps) to 32.3%. Operating expenses summed $108.3 million in the quarter under review, up 5.5% year over year. As a percentage of revenues, operating expenses were 21.9% compared with 21.2% a year ago.
Operating income was not adjusted in the reported quarter. The operating income decreased 10.9% year over year to $49 million. The operating margin decreased 150 bps year over year to 9.8%. High raw material costs, foreign currency exchange headwinds and temporary supply-chain disruptions played spoilsports.
Interest expenses in the reported quarter were $6.6 million, up 4.8% from the year-ago quarter. The adjusted effective tax rate was 26.9% in the quarter under review, marginally down from 27% in the prior-year quarter.
Balance Sheet and Cash Flow
While exiting the fiscal first quarter, Kennametal’s cash and cash equivalents were $64.6 million, down 24.5% from fourth-quarter fiscal 2022’s figure of $85.6 million. Long-term debt was $594.6 million, almost in line with the $594.4 million reported in the fiscal fourth quarter of 2022.
In the first three months of fiscal 2023, Kennametal used net cash of $10.7 million in operating activities against 15.8% net cash generated in the previous quarter. Capital invested in purchasing property, plant and equipment (net of the amount received on disposals) was $29.5 million, down 65.7% from $17.8 million in the previous fiscal year. Free cash flow was $202 million compared with $393 million in the last fiscal year.
In the fiscal first quarter of 2023, KMT’s dividend payments totaled $16 million and the company repurchased shares worth $19 million.
Kennametal announced that its board of directors approved a quarterly cash dividend of 20 cents per share to its shareholders of record as of Nov 8, 2022. The disbursement will be made on Nov 22.
Outlook
For the second quarter of fiscal 2023 (ending December 2022), Kennametal anticipates sales of $480-$500 million. On a sequential basis, the raw material headwind is expected to hurt sales by approximately $15 million.
Continued growth in energy, aerospace, earthworks and general engineering end markets will be beneficial. Business in the transportation market is expected to improve throughout the year.
Adjusted operating income for the quarter is anticipated to be $35 million (at least). Interest expense is anticipated to be approximately 8 million for the quarter.
For fiscal 2023 (ending June 2023), favorable pricing is anticipated to offset inflation related to wage and raw material costs. The company anticipates sales of $480-$500 million to $2.0-$2.08 billion, including a currency headwind of approximately $130 million. Adjusted EPS is anticipated to be $1.30-$1.70 per share.
The adjusted tax rate is anticipated to be 26-28% in the full fiscal compared with 27.2% in fiscal 2022. Free operating cash flow is expected to be approximately 100% of net income (adjusted).
Capital spending is expected to be $100-$120 million in the current fiscal year compared with $97 million reported in fiscal 2022.
Zacks Rank & Stocks to Consider
Kennametal currently carries a Zacks Rank #4 (Sell).
Some better-ranked companies from the Industrial Products sector are discussed below:
EPAC’s earnings estimates have increased 9.1% for fiscal 2023 (ending August 2023) in the past 60 days. The company’s shares have gained 25.1% in the past six months.
iRobot Corporation (IRBT - Free Report) presently has a Zacks Rank of 2 (Buy). IRBT’s earnings surprise in the last four quarters was 59.1%, on average.
In the past 60 days, iRobot’s earnings estimates have increased 0.1% for 2022. The stock has rallied 6.6% in the past six months.
Reliance Steel & Aluminum Co. (RS - Free Report) presently carries a Zacks Rank of 2. Its earnings surprise in the last four quarters was 13.6%, on average.
In the past 60 days, RS’s earnings estimates have increased 0.1% for 2022. The stock has popped 0.2% in the past six months.
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Kennametal (KMT) Q1 Earnings Miss Estimates, Revenues Up Y/Y
Kennametal Inc. (KMT - Free Report) reported mixed results for first-quarter fiscal 2023 (ended Sep 30, 2022). The company’s earnings missed the Zacks Consensus Estimate by 8.1%. However, quarterly sales beat estimates by 1.4%.
Adjusted earnings in the quarter under review came in at 43 cents per share, missing the Zacks Consensus Estimate of 37 cents. The bottom line decreased 22.7% from the year-ago figure.
Revenue Details
In the quarter under review, Kennametal’s revenues were $495 million, reflecting an increase of 2% from the year-ago quarter. Revenues beat the Zacks Consensus Estimate of $488 million.
Organic sales in the quarter grew 9%. Foreign currency headwind left an adverse impact of 7%. Business in energy, general engineering, transportation, aerospace and earthworks markets flourished in the quarter.
On a geographical basis, KMT’s revenues from American operations increased 12.4% year over year to $253.6 million, whereas sales from Europe, the Middle East and Africa region were $131.3 million, down 11.5% from the year-ago quarter. Sales from the Asia Pacific belt increased 0.5% to $109.9 million.
Kennametal reports results under two business segments, namely Metal Cutting and Infrastructure. The company’s segmental performance for the fiscal third quarter is briefly discussed below:
Metal Cutting revenues of $300 million were up 1% year over year. Organic sales growth in the quarter was 9%. Forex woes had an adverse impact of 8%.
Infrastructure revenues totaled $195 million, increasing 5% year over year. The results gained from 10% growth in organic sales, while foreign currency movement had an adverse impact of 5%.
Kennametal Inc. Price and Consensus
Kennametal Inc. price-consensus-chart | Kennametal Inc. Quote
Margin Profile
Kennametal’s cost of goods sold in the reported quarter increased 3.7% year over year to $334.8 million. The same represented 67.7% of revenues compared with 66.8% in the year-ago quarter.
The gross profit decreased 0.5% year over year to $160 million, wherein the margin contracted 100 basis points (bps) to 32.3%. Operating expenses summed $108.3 million in the quarter under review, up 5.5% year over year. As a percentage of revenues, operating expenses were 21.9% compared with 21.2% a year ago.
Operating income was not adjusted in the reported quarter. The operating income decreased 10.9% year over year to $49 million. The operating margin decreased 150 bps year over year to 9.8%. High raw material costs, foreign currency exchange headwinds and temporary supply-chain disruptions played spoilsports.
Interest expenses in the reported quarter were $6.6 million, up 4.8% from the year-ago quarter. The adjusted effective tax rate was 26.9% in the quarter under review, marginally down from 27% in the prior-year quarter.
Balance Sheet and Cash Flow
While exiting the fiscal first quarter, Kennametal’s cash and cash equivalents were $64.6 million, down 24.5% from fourth-quarter fiscal 2022’s figure of $85.6 million. Long-term debt was $594.6 million, almost in line with the $594.4 million reported in the fiscal fourth quarter of 2022.
In the first three months of fiscal 2023, Kennametal used net cash of $10.7 million in operating activities against 15.8% net cash generated in the previous quarter. Capital invested in purchasing property, plant and equipment (net of the amount received on disposals) was $29.5 million, down 65.7% from $17.8 million in the previous fiscal year. Free cash flow was $202 million compared with $393 million in the last fiscal year.
In the fiscal first quarter of 2023, KMT’s dividend payments totaled $16 million and the company repurchased shares worth $19 million.
Kennametal announced that its board of directors approved a quarterly cash dividend of 20 cents per share to its shareholders of record as of Nov 8, 2022. The disbursement will be made on Nov 22.
Outlook
For the second quarter of fiscal 2023 (ending December 2022), Kennametal anticipates sales of $480-$500 million. On a sequential basis, the raw material headwind is expected to hurt sales by approximately $15 million.
Continued growth in energy, aerospace, earthworks and general engineering end markets will be beneficial. Business in the transportation market is expected to improve throughout the year.
Adjusted operating income for the quarter is anticipated to be $35 million (at least). Interest expense is anticipated to be approximately 8 million for the quarter.
For fiscal 2023 (ending June 2023), favorable pricing is anticipated to offset inflation related to wage and raw material costs. The company anticipates sales of $480-$500 million to $2.0-$2.08 billion, including a currency headwind of approximately $130 million. Adjusted EPS is anticipated to be $1.30-$1.70 per share.
The adjusted tax rate is anticipated to be 26-28% in the full fiscal compared with 27.2% in fiscal 2022. Free operating cash flow is expected to be approximately 100% of net income (adjusted).
Capital spending is expected to be $100-$120 million in the current fiscal year compared with $97 million reported in fiscal 2022.
Zacks Rank & Stocks to Consider
Kennametal currently carries a Zacks Rank #4 (Sell).
Some better-ranked companies from the Industrial Products sector are discussed below:
Enerpac Tool Group Corp. (EPAC - Free Report) delivered an average four-quarter earnings surprise of 3.4%. EPAC presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.
EPAC’s earnings estimates have increased 9.1% for fiscal 2023 (ending August 2023) in the past 60 days. The company’s shares have gained 25.1% in the past six months.
iRobot Corporation (IRBT - Free Report) presently has a Zacks Rank of 2 (Buy). IRBT’s earnings surprise in the last four quarters was 59.1%, on average.
In the past 60 days, iRobot’s earnings estimates have increased 0.1% for 2022. The stock has rallied 6.6% in the past six months.
Reliance Steel & Aluminum Co. (RS - Free Report) presently carries a Zacks Rank of 2. Its earnings surprise in the last four quarters was 13.6%, on average.
In the past 60 days, RS’s earnings estimates have increased 0.1% for 2022. The stock has popped 0.2% in the past six months.