Kennametal (KMT) Q2 Earnings Top Estimates, Revenues Down Y/Y
Kennametal Inc. KMT reported second-quarter fiscal 2024 (ended Dec 31, 2023). adjusted earnings of 30 cents per share, which beat the Zacks Consensus Estimate of 25 cents. The bottom line increased 20% from the year-ago figure.
Revenue Details
In the quarter under review, Kennametal’s revenues were $495.3 million, decreasing 0.4% from the year-ago quarter’s figure. Organic sales declined 3% year over year in the quarter. Business days had a positive impact of 2%. Currency exchange positively affected sales by 1%.
KMT’s revenues matched the Zacks Consensus Estimate of $495 million.
On a geographical basis, revenues from American operations decreased 4.5% year over year to $238.9 million, whereas sales from Europe, the Middle East and Africa region were $152.9 million, up 7.4% from the year-ago quarter’s reading. Sales from the Asia Pacific belt decreased 1.1% to $103.5 million.
Kennametal reports results under two business segments, namely Metal Cutting and Infrastructure. Its segmental performance for the fiscal second quarter is briefly discussed below:
The Metal Cutting segment’s revenues of $311.4 million increased 4% year over year. Organic sales growth in the quarter was flat. Foreign currency movements had a favorable impact of 2%. The Zacks Consensus Estimate for Metal Cutting’s revenues was pegged at $302 million.
The Infrastructure segment’s revenues totaled $183.9 million, decreasing 7% year over year. Foreign currency movements had a favorable impact of 1% and unfavorable business days were flat year over year. Organic sales declined 8% year over year. The consensus estimate for Infrastructure’s revenues was pegged at $191 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 0.4% year over year to $355.7 million. The gross profit decreased 2.3% year over year to $139.6 million wherein the margin decreased 50 basis points (bps) to 28.2%. Operating expenses summed $107.3 million in the quarter under review, up 1.5% year over year.
The operating income decreased 19.8% year over year to $28.5 million. Operating margin decreased 140 bps year over year to 5.7%. Higher wages and general inflation, lower sales volumes and higher raw material costs were spoilsports.
Interest expenses in the reported quarter were $6.8 million, down 2.4% from the year-ago quarter’s figure. The adjusted effective tax rate was 9.0% in the quarter under review, down from 17.8% in the year-ago quarter.
Balance Sheet and Cash Flow
While exiting the second quarter of fiscal 2024, Kennametal’s cash and cash equivalents were $90.7 million compared with $106 million reported in fourth-quarter fiscal 2023. Long-term debt was $595.6 million, almost in line with $595.2 million reported in the fiscal fourth quarter of 2023.
In the first six months of fiscal 2024, Kennametal generated net cash of $88.3 million in operating activities compared with $52.6 million net cash generated in the previous fiscal year’s quarter. Capital invested in purchasing property, plant and equipment (net of the amount received on disposals) was $57.4 million, up 13.6% from $50.6 million in the prior fiscal year. Free operating cash flow was $36 million compared with $4.4 million in the previous fiscal year’s period.
In the second quarter of fiscal 2024, KMT, carrying a Zacks Rank #3 (Hold), paid a dividend worth $16 million and repurchased shares worth $15 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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 Feb 13, 2024. The disbursement will be made on Feb 27.
Q3 Fiscal 2024 Guidance
For the third quarter of fiscal 2024 (ending March 2024), Kennametal anticipates sales to be $510-$530 million. Earnings per share are anticipated to be 25-35 cents. The Zacks Consensus Estimate for earnings is 49 cents per share.
Fiscal 2024 Guidance
For fiscal 2024 (ending June 2024), the company anticipates sales to be $2.02-$2.07 billion compared with $2.10-$2.20 billion stated before. The Zacks Consensus Estimate is $2.08 billion. Adjusted earnings per share are anticipated to be $1.35-$1.65 compared with $1.75-$2.15 expected before. The consensus estimate for earnings is $1.74 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.
Performance of Other Industrial Companies
Tetra Tech, Inc. TTEK reported first-quarter fiscal 2024 (ended Dec 31, 2023) adjusted earnings of $1.40 per share, which surpassed the Zacks Consensus Estimate of $1.35. The bottom line surged 4.5% year over year, driven by strong momentum in each of its segments.
In the fiscal first quarter, Tetra Tech generated adjusted revenues of $1.2 billion, reflecting a year-over-year increase of 37.3%. Adjusted net revenues (adjusted revenues minus subcontractor costs) were $1.0 billion, up 37.8% year over year. Tetra Tech’s revenues exceeded the consensus estimate of $974 million.
A. O. Smith Corporation’s AOS fourth-quarter 2023 adjusted earnings of 97 cents per share surpassed the Zacks Consensus Estimate of 96 cents. The bottom line jumped 13% year over year, driven by the continued strong demand for residential water heaters in North America.
Net sales of $988.1 million narrowly missed the consensus estimate of $989 million. However, the top line increased 5.6% year over year.
Illinois Tool Works Inc. ITW reported fourth-quarter 2023 adjusted earnings of $2.42 per share, which surpassed the Zacks Consensus Estimate of $2.40. Earnings increased 3.4% year over year.
The company’s revenues of $3.98 billion missed the consensus estimate of $4.01 billion. The top line inched up 0.3% year over year due to a favorable foreign currency translation of 1.2%. However, organic sales decreased 0.5% and divestitures reduced revenues by 0.4%.
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