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Kaman's Aerosystems Restructuring to Lower Costs From 2019

Zacks Equity Research

Kaman Corporation KAMN recently announced a plan to restructure its Aerosystems business, for improving profitability. The move is in sync with the company’s existing initiatives to strengthen the Aerosystems business’ capacity utilization and operating efficiency.

The company, reportedly, operates under two segments, namely, Distribution and Aerospace. The Aerospace business has exhibited steady growth over time, accounting for 35.3% of total revenues in 2014 to 38.8% in 2016. Within this segment, the company deals with manufacturing of composite aerostructure, complex assembling, tooling design and manufacture, and conducting helicopter maintenance, repair and overhaul (MRO) activities.

A Peek Into the Headlines

Through its announced restructuring plans, Kaman intends to shut down its Composite Structures division in Bloomfield, CT, by transferring its operations to Wichita, KS-based composites facility and Bloomfield, CT-based Air Vehicles and MRO division.

Additionally, Kaman intends to transfer fabricated products operations at its Hyde facility in the U.K. to Darwen facility. This move might result in workforce reduction.

Financial Aspects of This Restructuring

The Aerosystems restructuring efforts, initiated in the third quarter of 2017, are anticipated to be completed in the fourth quarter of 2018. During this implementation phase, Kaman expects to incur pre-tax restructuring charges of $8-$10 million, including $5.5-$6.5 million cash expenses related to facility closure and employee separation, and $2.5-$3.5 million non-cash charges related to assets impairment and inventory write-down. Of the total estimated expenses, roughly $5 million will be incurred in 2017.

Upon completion of the restructuring initiatives, Kaman anticipates realizing annualized cost savings of $4 million.

Kaman Corporation Price and Consensus


Kaman Corporation Price and Consensus | Kaman Corporation Quote

Zacks Rank & Key Picks

With a market capitalization of $1.4 billion, Kaman currently carries a Zacks Rank #3 (Hold). Despite initiatives to improve business portfolio and curb costs, the company’s share price performance has weak over time. Its second-quarter 2017 results was weak, with adjusted earnings per share falling short of the Zacks Consensus Estimate by 2.04% and lagging the year-ago tally by 25%.

Notably, since the results release on Jul 31, 2017, the company’s shares have lost nearly 4.8%, wider than the decline of 1.9% recorded by the industry it belongs to.

Some better-ranked stocks in the industry are EnPro Industries NPO, Kadant Inc. KAI and Altra Industrial Motion Corporation AIMC. While both EnPro Industries and Kadant sport a Zacks Rank #1 (Strong Buy), Altra Industrial Motion carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EnPro Industries’ earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, its earnings are anticipated to grow 15.9% in the next three to five years.

Kadant’s average earnings surprise for the last four quarters was a positive 19.29%. Also, earnings expectations for 2017 and 2018 improved over the past 60 days.

Altra Industrial Motion’s earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company pulled off an average positive earnings surprise of 16.95% for the last four quarters.

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