Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong sell) on May 1, 2013.
Why the Downgrade?
Kennametal reported disappointing results for the fiscal third
quarter 2013 (ended Mar 31) on Apr 25, 2013. The company's
earnings per share in the quarter came in at 65 cents, 33.7%
below the year-ago reported earnings and 8.5% below the Zacks
Consensus Estimate of 71 cents.
Revenue plummeted 5.9% year over year as it was adversely
affected by a fall of 6% in organic revenue, a 5% impact from
fewer working days in the quarter and 1% negative impact from
foreign currency translation. These were, however, partially
offset to the tune of 6% due to two months' revenue contribution
Talking of costs and margins, cost of revenue represented 68.2%
of total revenue in the quarter; up from 64.6% in the year-ago
quarter while operating expenses stood at 19.6%. Adjusted
operating margin was down 390 basis points year over year to
12.1% in the quarter.
Results for the fiscal third quarter as well as prevailing
weakness in the company's industrial end markets as well as
in-road construction, underground mining, and oil and gas markets
in the U.S. forced management of Kennametal to revise down its
guidance for 2013.
It is anticipated that sales would now decline to the range of
5%-6% as against a drop ranging from 2%-4% expected earlier while
organic revenue is predicted to decline within the 8%-9% range
versus 7%-9% expected earlier. Earnings per share are now likely
to fall within the $2.45-$2.55 range, below the $2.60-$2.80 range
Disappointing results in the quarter combined with a gloomy
operating environment and lowered management guidance led to a
downward revision in earnings estimate for Kennametal in the last
7 days. The Zacks Consensus Estimate for fiscal 2013 has gone
down by 5.6% to $2.51 while for 2014, the estimate plummeted 4.6%
Also, Kennametal has a negative earnings surprise in three of
four trailing quarters with an average of -15.3%. For fiscal 2013
and 2014, we have an Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) of 0.0% and -1.5%, respectively.
Other Stocks to Consider
Kennametal Inc. currently has a market capitalization of $3.1
billion. Other stocks to watch out for in the industry are
EnPro Industries, Inc.
), each with a Zacks Rank #1 (Strong Buy) while
Lincoln Electric Holdings Inc.
) carries a Zacks Rank #2 (Buy).
GRACO INC (GGG): Free Stock Analysis Report
KENNAMETAL INC (KMT): Free Stock Analysis
LINCOLN ELECTRC (LECO): Free Stock Analysis
ENPRO INDUS INC (NPO): Free Stock Analysis
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