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Kadant (KAI) Tops Q1 Earnings & Sales Estimates, Ups View


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Kadant Inc.KAI kept its earnings streak alive in the first quarter of 2018, with earnings surpassing estimates by 11.46%. Including first-quarter results, the average earnings surprise for the last four trailing quarters was 15.50%.

The machinery company's adjusted earnings in the reported quarter were $1.07 per share, surpassing the Zacks Consensus Estimate of 96 cents. Also, the bottom line increased 30.5% from the year-ago tally of 82 cents.

Rise in Segmental & Product-Line Sales Drives Revenues

In the reported quarter, Kadant's revenues totaled $149.2 million, reflecting year-over-year growth of 45%. Organic revenues, excluding the impact of acquisitions and foreign currency translations, grew 5% year over year. Also, the top line surpassed the Zacks Consensus Estimate of $145 million by roughly 2.6%.

Bookings in the quarter under review totaled $181.9 million, increasing 53.1% from the year-ago quarter.

On a geographical basis, revenues from North America increased 54.7% year over year to $77.6 million while that from Europe grew 26.7% to $41.5 million and that from Asia expanded 69.3% to $20.1 million. Revenues generated from Rest of World operations totaled $9.9 million, increasing 23.6% year over year.

The company has two reportable segments - Papermaking Systems and Wood Processing Systems. In addition, it also generates revenues from Fiber-Based Products business. The information on these three sources of revenues for the quarter under review is given below:

Revenues from the Papermaking Systems segment were approximately $105.6 million, increasing 19.2% from the year-ago quarter. Organic revenues, excluding the impact of acquisitions and foreign currency translations, grew 5.5% year over year. Bookings in the quarter grew 23.4% year over year to $124.6 million.

Of the segmental revenues, roughly $45.5 million was sourced from Stock-Preparation product line. It reflected growth of 10.5% from the year-ago tally. Revenues from Doctoring, Cleaning & Filtration product-line were $27.2 million and from Fluid-Handling product-line was $32.9 million, reflecting a year-over-year increase of 7.4% and 2.2% from the respective tallies in the year-ago quarter.

Revenues from the Wood Processing Systems segment totaled $39.1 million, significantly above $9.9 million generated in the year-ago quarter. Excluding the impact of acquisitions and foreign currency translations, the segment's revenues declined 1.4% year over year. Bookings in the reported quarter surged 303.1% year over year to $52.7 million.

Revenues from the Fiber-Based Products business totaled $4.5 million, rising 2.2% year over year. Bookings in the quarter under review declined 4.2% year over year to $4.6 million.

Margin Profile Weakens

In the quarter under review, Kadant's cost of revenues increased 54.4% year over year to $83.1 million. It was 55.7% of revenues versus 52.3% in the first quarter of 2017. Gross margin slipped 340 basis points (bps) to 44.3%.

Selling, general and administrative expenses, which was roughly 30.7% of revenues, increased 32.2% year over year to approximately $45.8 million. Research and development expenses in the reported quarter were $2.9 million versus $2.1 million in the year-ago comparable quarter.

Adjusted operating income increased 40.7% year over year to $17.7 million while margin slipped 30 bps to 11.9%. Interest expense surged from roughly $0.3 million in the year-ago quarter to $1.7 million in the reported quarter.

Balance Sheet and Cash Flow

Exiting first-quarter 2018, Kadant's cash, cash equivalents and restricted cash were $73.7 million, down from $76.8 million at the previous quarter-end. Long-term debt balance decreased 2.3% sequentially to $235.9 million.

In the quarter under review, the company's net cash generation from operating activities totaled $7.2 million versus $1.7 million in the year-ago quarter. Capital spending totaled $5.2 million versus $1.7 million in the year-ago quarter.

Outlook

For 2018, Kadant anticipates gaining from solid booking performance in the first quarter and the favorable global economic conditions. Adjusted earnings per share are anticipated to be $5.15-$5.25, up from $4.95-$5.05 expected earlier. Total revenues are projected to be $625-$635 million, up from the previous projection of $605-$615 million.

For the second quarter, adjusted earnings per share are anticipated to range from 95 cents to $1.00.

Kadant Inc Price, Consensus and EPS Surprise

Kadant Inc Price, Consensus and EPS Surprise | Kadant Inc Quote

Zacks Rank & Stocks to Consider

With a market capitalization of approximately $1.1 billion, Kadant currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industry are DXP Enterprises, Inc. DXPE , Tennant Company TNC and IDEX Corporation IEX . While both DXP Enterprises and Tennant sport a Zacks Rank #1 (Strong Buy), IDEX Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

In the last 60 days, earnings estimates for each of these stocks improved for the current year. Also, average positive earnings surprise for last four quarters was 189.56% for DXP Enterprises, 1.39% for Tennant and 3.12% for IDEX Corporation.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: DXPE , KAI , IEX , TNC



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