) reported adjusted earnings per share of 74 cents in third-quarter
fiscal 2014 (ended Mar 31, 2014). The bottom-line result was 2
cents above the Zacks Consensus Estimate of 72 cents and increased
13.8% year over year.
GAAP earnings per share in the quarter came in at 64 cents versus
67 cents earned in the year-ago quarter.
Kennametal's revenues in third-quarter fiscal 2014 were $755.2
million, up 15.2% year over year. The year-over-year increase can
be attributed to a 3% hike in organic revenues, 1% gain from more
working days in the quarter and a 12% contribution from the
acquisition of Tungsten Materials Business (TMB) from ATI in Nov
Excluding the $77.7 million contribution from the TMB acquisition,
adjusted revenues in the quarter were $677.6 million, lagging the
Zacks Consensus Estimate of $746.0 million
A brief discussion on the segments of Kennametal is given below:
The Industrial segment's revenues in the quarter increased 13.3%
year over year to $399.7 million. Organic growth of 5% was driven
by improvements in general engineering and transportation end
markets, offset by declines in aerospace and defense end markets.
On a geographical basis, revenues increased 11% in Asia, 9% in
Europe and 1% in the Americas. Adjusted revenues, excluding the
$28.4 million gain from TMB acquisition, were $371.3 million.
The Infrastructure segment generated revenues of $355.6 million,
reflecting an increase of 17.5% year over year. Organic growth in
the quarter was flat year over year. Revenues in Europe grew 4% and
in North America increased by 3%, offset partially by 9% decline in
Asia. Adjusted revenues, excluding $49.3 million of gain from TMB
acquisition, were $306.3 million.
On a geographical basis, Kennametal's revenues from North America
increased 21.4% year over year to $351.5 million; revenues from
Western Europe were $238.3 million, up 19.6% year over year while
revenues from Rest of the World was about $165.5 million, down 0.7%
year over year.
Cost of revenue in fiscal third-quarter increased 15.6% year over
year and represented 68.4% of total revenue; up from 68.2% in the
year-ago quarter. Operating expenses, as a percentage of total
revenue, stood at 20.2%, up 60 basis points year over year.
Adjusted operating margin in the quarter was 12.7%.
Exiting third-quarter fiscal 2014, Kennametal had cash and cash
equivalents of $161.8 million versus $163.3 million in the
preceding quarter. Long-term debt and capital leases decreased
sequentially to $1,022.1 million from $1,035.6 million in the
In the 9 months ended Mar 31, 2014, Kennametal generated cash of
$153.2 million versus $150.4 million in the year-ago period.
Capital spent on purchases of property, plant and equipment was
$86.0 million, up from $53.8 million in the 9 months ended Mar 31,
Free cash flow was approximately $68.2 million compared with $98.3
million in the year-ago period.
In conjunction with the earnings release, Kennametal announced that
its board of directors has approved a quarterly cash dividend
payment of 18 cents per share on May 28 to shareholders of record
as of May 13, 2014.
For fiscal 2014, Kennametal lowered its total sales growth guidance
to a range of 10−11% from the 12−13% range expected earlier. The
revised guidance includes a roughly 7−8% (versus 7−9% expected
earlier) contribution from the TMB acquisition.
Organic revenue growth is anticipated to be within the 2−3% range
versus 2−4% expected earlier.
Earnings per share guidance has been lowered to a range of
$2.60−$2.70 from $2.60-$2.75 expected earlier.
Kennametal anticipates cash flow from operating activities to range
within the $280−$310 million range. Capital expenditure is
predicted to be in the $130−$140 million range, while free cash
flow is likely to be within $150−$170 million.
Kennametal currently has a market capitalization of $3.7 billion
and carries a Zacks Rank #3 (Hold). Other stocks to watch out for
in the industry include
Stanley Black & Decker, Inc.
). While NN Inc. holds a Zacks Rank #1 (Strong Buy), Stanley Black
& Decker and Timken carry a Zacks Rank #2 (Buy).
(We are reissuing this article to correct an error. We had
erroneously attributed the Tungsten Materials Business [TMB] a a
company called Tembec, which trades on the Toronto Exchange. This
company is not affiliated with Kennametal. Thwe original article,
published earlier today, May 1, 2014, should not be relied
KENNAMETAL INC (KMT): Free Stock Analysis
NN INC (NNBR): Free Stock Analysis Report
STANLEY B&D INC (SWK): Free Stock Analysis
TIMKEN CO (TKR): Free Stock Analysis Report
To read this article on Zacks.com click here.