HDNG Hardinge Inc. (delisted)

Kennametal Inc. (KMT) reported its financial results for the fiscal third quarter of 2013 (ended Mar 31, 2013) on Apr 25, 2013. Adjusted earnings per share came in at 65 cents, way below earnings of 98 cents reported in the year-ago quarter and the Zacks Consensus Estimate of 71 cents.

Including adjustments from Stellite, GAAP earnings per share in the quarter were 67 cents versus 93 cents in the year-ago quarter.   

Revenue

Kennametal reported a 5.9% year-over-year decline in its revenue that settled at $655.4 million. The decline in revenue was due primarily to a fall of 6% in organic revenue, a 5% impact from fewer working days in the quarter and 1% negative impact from foreign currency translation. These were, however, offset to the tune of 6% due to two months’ revenue contribution from Stellite.     

Adjusted revenue in the quarter came in at $594.2 million, down compared with $673.9 million in the year-ago quarter.

A brief discussion on the segments of Kennametal is given below:

Industrial segment generated $373.8 million in revenue, down 11% from the year-ago quarter as weakness in general engineering and transportation impacted results adversely. Moreover, revenues across the Americas, Asia and Europe declined.

Infrastructure segment reported 1% year-over-year increase in revenue that came in at $281.6 million. The rise can be attributed to revenue contributions from Stellite, offset by an organic revenue decline and lesser working days in the quarter. On an adjusted basis, Infrastructure revenue in the quarter was $220.3 million, down compared with $255.3 million in the year-ago quarter.

On a geographical basis, revenue in North America plummeted 11.4% year over year to $289.5 million; revenue from Western Europe was $199.2 million, up 3.2% year over year while revenue from Rest of the World was about $166.6 million, down 5.6% year over year.

Margins

Cost of revenue in the quarter went down 0.7% year over year and represented 68.2% of total revenue; up from 64.6% in the year-ago quarter. Operating expenses, as a percentage of total revenue, stood at 19.6%. Adjusted operating margin in the quarter was 12.1%, down 390 basis points year over year.

Balance Sheet

Exiting the fiscal third quarter 2013, cash and cash equivalents of Kennametal stood at $322.1 million compared with $216.8 million in the previous quarter. Long-term debt and capital leases were roughly $703.9 million versus $704.2 million in the previous quarter.
 
Cash Flow

Net cash flow from operating activities in the quarter was $96.1 million, up from $93.1 million in the year-ago quarter while capital expenditure was at $19.4 million versus $25.1 million in the year-ago quarter. Free cash flow was approximately $77.7 million compared with $69.9 million in the year-ago quarter.

Apart from declaring its financial results, Kennametal also announced that it has received approval from its Board of Directors for the payment of a 16 cent per share quarterly dividend. The payment will be made on May 22, 2013 to shareholders of record as on May 7, 2013.

Outlook

For 2013, management of Kennametal now anticipates that sales would decline to the range of 5%-6% as against a drop ranging from 2%-4% expected earlier. Organic revenue is predicted to decline within the 8%-9% range versus 7%-9% anticipated earlier. The lowered guidance reflects prevailing weakness in the company’s industrial end markets as well as in road construction, underground mining, and oil and gas markets in the U.S.

Earnings per share are now expected to fall within the $2.45-$2.55 range, below the $2.60-$2.80 range projected earlier.

Kennametal also revised its cash flow guidance for fiscal 2013. Cash flow generated from operating activities is likely to be within $260-280 million (versus $290-$325 million expected earlier), capital expenditure to be within the $90-$100 million range and free cash flow to be within the $170-$180 million range (versus $200-$225 million expected earlier).

Kennametal currently carries a Zacks Rank #3 (Hold). Other stocks to watch out for in the industry are MRC Global Inc. (MRC)— expected to report on May 2, 2013; Actuant Corporation (ATU)—expected to report on Jun 19, 2013; and Hardinge Inc. (HDNG)—expected to release its results on May 6, 2013.
 

 
ACTUANT CORP (ATU): Free Stock Analysis Report
 
HARDINGE INC (HDNG): Free Stock Analysis Report
 
KENNAMETAL INC (KMT): Free Stock Analysis Report
 
MRC GLOBAL INC (MRC): Free Stock Analysis Report
 
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