Australia markets closed
  • ALL ORDS

    7,326.20
    +18.50 (+0.25%)
     
  • AUD/USD

    0.6935
    -0.0008 (-0.11%)
     
  • ASX 200

    7,093.00
    +17.90 (+0.25%)
     
  • OIL

    110.17
    -0.32 (-0.29%)
     
  • GOLD

    1,808.00
    -0.20 (-0.01%)
     
  • BTC-AUD

    43,231.52
    -677.85 (-1.54%)
     
  • CMC Crypto 200

    671.88
    -9.23 (-1.35%)
     

Kennametal (KMT) to Gain From End-Market Strength Amid Risks

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Kennametal Inc. KMT stands to benefit from its presence in diverse end markets that enables it to neutralize risks associated with a single market with strength across others. The company has been witnessing solid momentum across its businesses in end markets like general engineering, energy, transportation, aerospace and earthworks. For second-quarter fiscal 2022 (ended December 2021, results are awaited), its sales are anticipated to be $480-$500 million, indicating year-over-year growth of 9-14%.

The company’s healthy balance sheet might prove beneficial. Exiting first-quarter fiscal 2022 (ended September 2021), it reduced its net debt to $486 million from $541 million in the year-ago quarter. It lowered its notes payable by $8 million in the quarter. Also, its interest expenses declined 40.6% to $6.3 million in the quarter on a year-over-year basis.

Kennametal’s policy of rewarding shareholders handsomely through dividend payments and share buybacks will work in its favor. In the fiscal first quarter, it paid out dividends worth $16.7 million and repurchased shares worth $12.9 million. Also, in August 2021, it announced a share buyback program worth $200 million.

However, Kennametal has been witnessing adverse impacts of cost inflation. In the fiscal first quarter, the company’s cost of sales and operating expenses increased 9.3% and 10%, respectively, on a year-over-year basis. Inflation related to merit increase, price/raw materials and higher depreciation expenses is expected to have an adverse impact of $10 million in the fiscal second quarter.

High taxes might also be concerning in fiscal 2022 (ending June 2022). The company expects a tax rate of 25-28% for the year compared with 23.6% reported in fiscal 2021 (ended June 2021).

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

The Zacks Rank #3 (Hold) stock has gained 4.3% in the past three months compared with the industry’s growth of 6.3%.

Stocks to Consider

Some better-ranked companies from the Zacks Industrial Products sector are discussed below.

Helios Technologies, Inc. HLIO presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise in the last four quarters was 37.54%, on average.

In the past 60 days, Helios’ earnings estimates have increased 9.6% for 2022. Its shares have gained 12.5% in the past three months.

EnPro Industries, Inc.NPO presently carries a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 54.81%, on average.

In the past 60 days, EnPro’s earnings estimates have increased 12.8% for 2022. Its shares have gained 24.1% in the past three months.

Kadant Inc. KAI presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 19.21%, on average.

Kadant’s earnings estimates have increased 1% for 2022 in the past 60 days. Its shares have gained8.9% in the past three months.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Kadant Inc (KAI) : Free Stock Analysis Report

Kennametal Inc. (KMT) : Free Stock Analysis Report

EnPro Industries (NPO) : Free Stock Analysis Report

Helios Technologies, Inc (HLIO) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting