We have issued an updated research report on Kennametal Inc. KMT on Dec 28, 2016. The company manufactures and distributes high-speed metal cutting tools, tooling systems, wear-resistant parts, cemented tungsten carbides, super alloys, among others. It currently has a market capitalization of approximately $ 2.6 billion.
After the release of first-quarter fiscal 2017 results on Oct 26, Kennametal’s shares yielded a 12.5% return, outperforming the return of 5.6% generated by the Zacks categorized Machine Tools & Related Products industry.
Over the long run, Kennametal seems well positioned to benefit from a well diversified product portfolio as well as a vast customer base in the industrial and infrastructure end markets. Key markets served include aerospace, automotive, machine tool and farm machinery industries, highway construction, coal mining, quarrying, and oil and gas exploration industries.
Kennametal is keen on making meaningful acquisitions and disposing non-core assets to align its business portfolio with current market demands and also improve profitability. In fiscal 2016, the company divested certain non-core assets, comprising 18 facilities including 11 manufacturing and seven small facilities from castings, steel-plate fabrication and deburring operations.
Moreover, Kennametal is keen on developing a sound cost structure by rationalization of certain manufacturing facilities and lowering of costs through employee and cost-reduction programs. By Dec 2018, the company anticipates its restructuring programs, including headcount reductions initiatives and others, to yield pre-tax savings of approximately $ 140−$ 155 million, while charges related to these initiatives will likely be $ 155−$ 175 million.
Based on the above-mentioned tailwinds, Kennametal has set for itself some long-term targets (2017−2019), including total revenue growth within 2−3% (Compound Annual Growth Rate – CAGR), earnings before interest and tax margin improvement of 400−500 basis points (bps), earnings per share growth of above 20% (CAGR), free cash flow greater than 10% of sales and improvement of 400−500 bps in return on invested capital.
For fiscal 2017, Kennametal anticipates adjusted earnings to be within $ 1.20−$ 1.50 per share, up from the previous projection of $ 1.10−$ 1.40.
Kennametal Inc. currently has a $ 2.6 billion market capitalization and carries a Zacks Rank #2 (Buy). The earnings estimates for the stock is pegged at $ 1.30 per share for fiscal 2017 and $ 1.63 per share for fiscal 2018, representing year-over-year growth of 17.34% and 25.24%, respectively.
Other stocks worth considering in the machinery industry include Enersys Inc. ENS , Deere & Company DE and Titan International, Inc. TWI . While both Enersys Inc. and Deere & Company sport a Zacks Rank #1 (Strong Buy), Titan International carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here .
Enersys Inc’s earnings estimates for fiscal 2017 improved over the last 60 days. It has an average positive earnings surprise of 3.01% for the trailing four quarters.
Deere & Company reported better-than-expected results in the last four quarters, with a positive average earnings surprise of 58.17%. Also, bottom-line expectations for fiscal 2017 and fiscal 2018 improved over the past 60 days.
Titan International’s bottom line expectations for 2017 have been revised upward, over the last 60 days.
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KENNAMETAL INC (KMT): Free Stock Analysis Report
DEERE & CO (DE): Free Stock Analysis Report
TITAN INTL INC (TWI): Free Stock Analysis Report
ENERSYS INC (ENS): Free Stock Analysis Report
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Plantations International