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Key Tech Inches Closer to 52-wk High - Analyst Blog

Posted: 10/8/2013 8:44:00 AM
Referenced Stocks: BWC;KTEC;MIDD;MNTX

Shares of Key Technology, Inc . ( KTEC ) have been moving north over the past few days and it gained 4% to close at $14.46 on Oct 7. The 4% gain has now taken the stock closer to its 52-week high of $16.40. In fact, the stock had touched an intra-day high of $15.40 yesterday.

Possible Driver

Volume traded was 3,263 yesterday, higher than the stock's last 10-day average volume of 2,467 shares. What possibly could have triggered the 4% increase yesterday is a report from Research and Markets regarding Global Trends & Forecasts to 2018 for the Processed Meat & Meat Processing Equipment Market.

As per the report, processed meat is gaining popularity and its global market is poised to grow at a CAGR of 14.3% from 2013 to 2018. Key Technology is a key player in this area, providing easy-to-sanitize inspection, conveying, feeding, metering, and other poultry processing equipment that help cut labor expenses, meet throughput requirements, as well as achieve product safety standards that meet USDA and customers' demand. Thus, the company will grow in tandem with the increased demand in the meat market.

Other Fundamentals

Nonetheless, there are certain strong fundamentals that may evoke a positive sentiment about the company. Among the positives - the company reported significant year-on-year earnings improvement in third quarter, backlog looks promising and it closed a key acquisition. Moreover, the Zacks Consensus Estimate for 2013 stands at 58 cents per share, translating into an impressive 621% annual growth.

The stock has amassed a year-to-date return of roughly 38.4%. Based on the current price, this designer and manufacturer of  automated solutions for food processing, industrial and pharmaceutical markets is trading at a forward P/E of 18.46x, a premium of 15% to the peer group average of 15.99x.

Quarterly Results

Key Technology had reported its third quarter financial results on July 25. Earnings increased more than fourfold to 23 cents per share from 5 cents in the year-ago quarter with an earnings surprise of 9.52%.

After bearing a loss in the first quarter, Key Technology successfully turned around and reported solid earnings beats in the second and third quarters of 2013. Margins were aided by improved product mix and more efficient plant utilization.

Key Technology ended the second quarter with a sound backlog of $41.7 million compared with $24.2 million one year ago. New orders received during the quarter were $30.9 million, up from $24.9 million in the corresponding period last year. Orders were reported to be strong, particularly in the potato market as well as the dried fruit and nut markets.

Visys Acquisition

Key Technology completed the acquisition of Belgium-based Visys NV, a supplier of innovative digital sorters, in Feb 2013. The total value of the deal was approximately $21 million. The transaction is expected to be accretive within the first 12 months. The acquisition will increase Key Technology's share in its core markets, help it to expand into new high-potential markets, and accelerate its development of next-generation sorting technologies.


Though we carry a Zacks Rank #3 (Hold) on the stock, the company has been showing some positive trends and impressive earnings results (scheduled next month) may further aid the stock's momentum.

Other Stocks to Consider

Among stocks in the industrial products sector worth mentioning are Manitex International, Inc . ( MNTX ) and Middleby Corp. ( MIDD ), both carrying a Zacks Rank #1 (Strong Buy), and The Babcock & Wilcox Compan y ( BWC ) that carries a Zacks Rank #2 (Buy).

BABCOCK&WILCOX (BWC): Free Stock Analysis Report

KEY TECHNOLOGY (KTEC): Free Stock Analysis Report

MIDDLEBY CORP (MIDD): Free Stock Analysis Report

MANITEX INT INC (MNTX): Free Stock Analysis Report

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