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Kadant (KAI) Shares Gain 28% in 3 Months: What's Driving It?

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·3 min read
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  • KAI
  • NPO

Shares of Kadant Inc. KAI have gained notably in the past three months. Solid bookings, focus on innovation, improving end-market conditions and healthy rewards to shareholders seem to have boosted sentiments for the stock.

The Westford, MA-based company belongs to the Zacks Manufacturing - General Industrial industry — which comes under the ambit of the Zacks Industrial Products sector. The company has a $2.1-billion market capitalization and it currently carries a Zacks Rank #2 (Buy).

In the past three months, the company’s shares have gained 28.1% compared with the industry’s growth of 85.7%. Notably, the S&P 500 has risen 5.7% and the sector has grown 32% during the same period.

Factors Influencing the Stock

Kadant delivered better-than-expected results for the fourth quarter of 2020, with both earnings and sales surpassing estimates by 18.46% and 2.36%, respectively. Also, adjusted earnings in the quarter improved 17% as lower costs and expenses offset the decline in revenues. Notably, bookings at $197 million reflected year-over-year growth of 23%.

In the quarters ahead, the company seems well-positioned to benefit from improving project activities and orders, as was visible in the fourth quarter of 2020. End-markets are gradually gaining strength as the pandemic-related adversities are slowly subsiding. Revenues are anticipated to grow 9-12% for 2021.

In addition to the aforementioned factors, solid product offerings, business exposure in 20 countries and innovation efforts are likely to bode well. Moreover, the company’s share price moved north as it offered shareholders a hike of 4.2% in the quarterly dividend rate. The current rate now stands at 25 cents per share. Healthy cash flow and a solid balance sheet too are tailwinds.

Currently, the Zacks Consensus Estimate for the company’s earnings is pegged at $5.83 for 2021, marking an increase of 10.6% from the 60-day-ago figure. Also, the estimate for the first quarter improved from $1.22 to $1.36, driven by two upward revisions in estimates against one downward. Such improvement in earnings estimates is reflective of healthy operating conditions for the company.

Kadant Inc Price and Consensus

Kadant Inc Price and Consensus
Kadant Inc Price and Consensus

Kadant Inc price-consensus-chart | Kadant Inc Quote

Other Stocks to Consider

Some other top-ranked stocks in the sector are EnPro Industries, Inc. NPO, Applied Industrial Technologies, Inc. AIT and Chart Industries, Inc. GTLS. While EnPro sports a Zacks Rank #1 (Strong Buy), both Applied Industrial and Chart Industries carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for these stocks have improved for the current year. Further, earnings surprise for the last reported quarter was 143.14% for EnPro Industries, 28.95% for Applied Industrial and 58.75% for Chart Industries.

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