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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.
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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