Kadant (KAI) Q4 Earnings & Revenues Beat Estimates, Up Y/Y

Kadant Inc.KAI reported better-than-expected fourth-quarter 2018 results wherein earnings surpassed estimates by 22.1%.

The company’s adjusted earnings in the reported quarter were $1.66 per share, surpassing the Zacks Consensus Estimate of $1.36. Moreover, the bottom line increased 45.6% from the year-ago quarter figure of $1.14. The upside can be primarily attributed to impressive sales growth and improved operating income.

For 2018, Kadant’s adjusted earnings came in at $5.34 per share, up 19% on a year-over-year basis.

Segmental Details

In the reported quarter, Kadant’s revenues totaled $163.9 million, reflecting year-over-year growth of 9.9%. Also, the top line surpassed the Zacks Consensus Estimate of $161 million by 1.8%.

For 2018, Kadant reported revenues of $633.8 million, up 23.1% on a year-over-year basis.

Kadant Inc Price, Consensus and EPS Surprise

Kadant Inc Price, Consensus and EPS Surprise | Kadant Inc Quote

Bookings in the quarter under review totaled $147.1 million, increasing 0.3% from the year-ago quarter. The improvement was driven by as solid growth in bookings, particularly in North America and Europe, partially offset by weak bookings generated in South America and Asia.

On a geographical basis, revenues from North America increased 14.8% year over year to $78.5 million while that from Asia expanded 26% to $31.2 million. Revenues generated from Europe declined 3.6% to $43.2 million while that from the Rest of World operations totaled $11 million, decreasing 1.3% 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 $119.1 million, increasing 6.1% from the year-ago quarter. Organic revenues, excluding the impact of foreign currency translations, grew 9.2% year over year. Bookings in the quarter under review declined 2.4% to $105.2 million.

Of the segmental revenues, roughly $57.1 million was sourced from Stock-Preparation product line. It reflected growth of 5% from the year-ago quarter. Revenues from Doctoring, Cleaning & Filtration product-line were $28.7 million, and from Fluid-Handling product-line was $33.3 million, reflecting increase of 7.5% and 7.4% from the respective tallies in the year-ago quarter.

Revenues from the Wood Processing Systems segment totaled $42 million, significantly surpassing $34 million generated a year ago. Excluding the impact of foreign currency translations, the segment’s revenues increased 28.4%. Bookings in the reported quarter jumped 11.1% to $38.9 million.

Revenues from the Fiber-Based Products business totaled $2.8 million, declining 4.5% year over year. Bookings in the quarter under review fell 21.6% to $2.9 million.

Margin Details

In the quarter, Kadant’s cost of revenues increased 10.1% year over year to about $93 million. It was 56.7% of revenues in the quarter. Gross margin was 43.3%, same as recorded in the year-ago quarter.

Selling, general and administrative expenses, which was roughly 26.6% of revenues, decreased 0.5% year over year to approximately $43.6 million. Research and development expenses in the were $2.5 million compared with $2.6 million in the year-ago quarter.

Adjusted operating income increased 24.9% year over year to $26.1 million while adjusted margin slipped 190 basis points (bps) to 15.9%.

Balance Sheet and Cash Flow

Exiting 2018, Kadant had cash, cash equivalents and restricted cash of $46.1 million, down from $76.8 million at the end of the 2017. Long-term debt balance decreased 27.7% to $171.4 million.

In the quarter under review, the company’s net cash generation from operating activities totaled $10.4 million, down from $32.8 million. Capital spending totaled $3.7 million compared with $8.6 million a year ago.

Outlook

The company has given bullish 2019 guidance. Notably, adjusted earnings are currently anticipated to lie within the $5.20-$5.35 per share range. Additionally, the company has given revenue guidance for 2019 between $700 million and $710 million.

For first-quarter 2019, adjusted earnings per share are predicted to be $1.11-$1.17. Revenues are anticipated to be $160-$165 million.

Zacks Rank & Stocks to Consider

Kadant currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Chart Industries, Inc. GTLS, Roper Technologies, Inc. ROP and Dover Corporation DOV. While Chart Industries sports a Zacks Rank #1 (Strong Buy), Roper and Dover carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chart Industries surpassed estimates in each of the trailing four quarters, the average beat being 31.30%.

Roper exceeded estimates in each of the trailing four quarters, the average beat being 4.96%.

Dover surpassed estimates in each of the trailing four quarters, the average beat being 6.59%.

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