Kennametal (KMT) Q1 Earnings Top Estimates, Revenues Down Y/Y
Kennametal Inc. KMT reported first-quarter fiscal 2024 (ended Sep 30, 2023). adjusted earnings of 41 cents per share, which beat the Zacks Consensus Estimate of earnings of 35 cents per share. The bottom line increased 20.6% from the year-ago figure.
Revenue Details
In the quarter under review, Kennametal’s revenues were $492.5 million, decreasing 0.5% from the year-ago quarter’s figure. Organic sales in the quarter were flat year over year. There was no meaningful effect from business days or currency exchange as well.
KMT’s revenues missed the Zacks Consensus Estimate of $499 million.
On a geographical basis, revenues from American operations decreased 2.7% year over year to $246.7 million, whereas sales from Europe, the Middle East and Africa region were $148.7 million, up 13.3% from the year-ago quarter’s reading. Sales from the Asia Pacific belt decreased 11.7% to $97 million.
Kennametal reports results under two business segments, namely Metal Cutting and Infrastructure. Its segmental performance for the fiscal firstquarter is briefly discussed below:
The Metal Cutting segment’s revenues of $308.2 million increased 3% year over year. Organic sales growth in the quarter was 2%. Forex woes had a favorable impact of 1%. The Zacks Consensus Estimate for Metal Cutting’s revenues was pegged at $301 million.
The Infrastructure segment’s revenues totaled $184 million, decreasing 5% year over year. Foreign currency movements had an adverse impact of 1% and unfavorable business days lowered sales by 1%. Organic sales declined 3% year over year. The consensus estimate for Infrastructure’s revenues was pegged at $195 million.
Kennametal Inc. Price, Consensus and EPS Surprise
Kennametal Inc. price-consensus-eps-surprise-chart | Kennametal Inc. Quote
Margin Profile
Kennametal’s cost of goods sold in the reported quarter decreased 1.6% year over year to $329.6 million. The gross profit increased 1.8% year over year to $162.9 million wherein the margin increased 80 basis points (bps) to 33.1%. Operating expenses summed $111.6 million in the quarter under review, up 3.1% year over year.
The operating income decreased 7% year over year to $45.1 million. Operating margin decreased 60 bps year over year to 9.2%. Higher wages and general inflation, lower sales volumes and higher raw material costs were spoilsports.
Interest expenses in the reported quarter were $6.6 million, down 0.6% from the year-ago quarter’s figure. The adjusted effective tax rate was 21% in the quarter under review, down from 27.5% in the prior-year quarter.
Balance Sheet and Cash Flow
While exiting the first quarter of fiscal 2024, Kennametal’s cash and cash equivalents were $95.1 million compared with $106 million reported in fourth-quarter fiscal 2023. Long-term debt was $595.4 million, almost in line with $595.2 million reported in the fiscal fourth quarter of 2023.
In the first three months of fiscal 2024, Kennametal generated net cash of $25.7 million in operating activities against $10.7 million net cash spent in the previous fiscal year’s quarter. Capital invested in purchasing property, plant and equipment (net of the amount received on disposals) was $31.8 million, up 7.9% from $29.5 million in the prior fiscal year. Free operating cash outflow was $3 million compared with $40 million cash outflow in the previous fiscal year’s period.
In the first three months of fiscal 2024, KMT’s dividend payments totaled $16 million and it repurchased shares worth $14 million.
Dividend Update
Kennametal announced that its board of directors approved a quarterly cash dividend of 20 cents per share to its shareholders of record as of Nov 07, 2023. The disbursement will be made on Nov 21.
Q2 Fiscal 2024 Guidance
For the second quarter of fiscal 2024 (ending December 2023), Kennametal anticipates sales to be$490-$515 million. Earnings per share are anticipated to be 20-30 cents. The Zacks Consensus Estimate for earnings is 33 cents per share.
Fiscal 2024 Guidance
For fiscal 2024 (ending June 2024), the company anticipates sales to be $2.10-$2.20 billion. The midpoint of the guided range — $2.15 billion — is in line with the Zacks Consensus Estimate. Adjusted earnings per share are anticipated to be $1.75-$2.15. The midpoint of the guided range — $1.95 — lies above the consensus estimate of earnings of $1.77 per share. Free operating cash flow is expected to be approximately 100% of net income (adjusted).
Capital spending is expected to be $100-$110 million in the current fiscal year.
Zacks Rank & Stocks to Consider
KMT currently carries a Zacks Rank #4 (Sell). Some better-ranked companies from the Industrial Products sector are discussed below:
Applied Industrial Technologies, Inc. AIT presently carries a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 13.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AIT’s earnings estimates have increased 2.7% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 23.9% in the past year.
Axon Enterprise, Inc. AXON currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 60.2%, on average.
In the past 60 days, estimates for Axon’s earnings have remained steady for 2023. The stock has soared 42.7% in the past year.
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