On Apr 4, 2014, we issued an updated research report on
). To date, no major improvement has been recorded in the
company's share price (still down by 9.5%) since the announcement
of fiscal second-quarter 2014 (ended Dec 31, 2013) results on Jan
Lackluster results coupled with the weak outlook for fiscal 2014
have triggered downward revisions in earnings estimates. In the
last 60 days, of the 8 firms covering the stock, 3 lowered their
earnings estimates for fiscal 2014, while out of 11 firms, 6
decreased their estimates for fiscal 2015. The Zacks Consensus
Estimate is at $2.64 and $3.30 for fiscal 2014 and 2015,
reflecting a decline of 2.6% and 2.9% respectively.
A brief snapshot of the results and outlook is provided below:
Earnings per share in the quarter were 52 cents, roughly 15%
below the Zacks Consensus Estimate. Total revenue grew 9%. The
Industrial segment posted healthy results, offset by weakness in
the earthworks and transportation markets that pulled down
organic growth in the Infrastructure segment. Cost of revenue and
operating expenses, as a percentage of total revenue, went up 150
basis points (bps) and 130 bps respectively.
Management lowered its organic revenue guidance range to 2-4% for
fiscal 2014 versus the prior forecast of 4-6%, expecting
slower-than-anticipated recovery in oil and gas markets and
weakness in underground mining in the U.S. and China. The
Infrastructure segment will remain weak due to lower volume
Also, the earnings outlook was lowered to a range of $2.60-$2.75
a share versus the prior prediction of $2.90-$3.05 due to
dilution expected from the acquisition of the Tungsten Materials
Business (TMB), completed in Nov 2013.
Lowered earnings estimates as well as an average negative
earnings surprise of 7.5% for the trailing 4 quarters have raised
skepticism over Kennametal's performance in the quarter ahead.
Currently, the company has an
of -1.39%, -1.14% and -5.15% for fiscal third-quarter 2014,
fiscal 2014 and fiscal 2015 respectively.
Kennametal currently has a market capitalization of $3.4 billion
and carries a Zacks Rank #4 (Sell). Some better-ranked stocks in
the industry include
Lincoln Electric Holdings Inc.
Columbus McKinnon Corporation
). While NN Inc. holds a Zacks Rank #1 (Strong Buy), Lincoln
Electric Holdings and Columbus McKinnon carry a Zacks Rank #2
COLUMBUS MCKINN (CMCO): Free Stock Analysis
KENNAMETAL INC (KMT): Free Stock Analysis
LINCOLN ELECTRC (LECO): Free Stock Analysis
NN INC (NNBR): Free Stock Analysis Report
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