Kennametal Reaches 52-Week High - Analyst Blog
January 02 2014 - 9:50AM
Zacks
Shares of Kennametal
Inc. (KMT) touched a new 52-week high of $52.37 during the
trading session on Dec 31. This is above the previous high of
$52.20 reached on Dec 27.
Kennametal’s shares closed at $52.07 at the end of trading on Dec
31, with a solid year-to-date return of 23.2%. The volume of shares
traded during that session was 0.38 million. Further upside
potential exists for this Zacks Rank #3 (Hold) machine tools and
accessories maker as reflected in its projected earnings growth
rate of 13.3% for the next five years and positive revisions in
earnings estimate for fiscal 2014 and 2015.
Growth Drivers
Kennametal’s preference for accretive acquisitions and dispositions
of non-core assets to expand its business has reaped success in the
past and is expected to benefit in the quarters ahead as well.
Further, the acquired tungsten materials business from Allegheny
Technologies in Nov 2013 is worth mentioning. The acquisition added
$340 million to the company’s annual revenue and 1,175 employees.
This leading producer of tungsten metallurgical powders and tooling
technologies and components will enable Kennametal to generate
$30–$45 million worth annual savings and will expand the company's
presence in key growth sectors, including aerospace, energy and
associated process industries.
Moreover, in the near term, Kennametal anticipates to realize sales
within $200–$220 million range with neutral earnings impact for the
eight months of fiscal 2014. Additionally, cash tax benefits of
$60–$70 million are expected to be realized during the same
period.
Kennametal, over the long term, expects organic growth rate of
6%–10% (CAGR), EBIT % to be greater than or equal to 15%, earnings
per share to grow 15%–20% (CAGR), capital expenditures to
constitute 3%–4% of sales and free cash flow to be greater than or
equal to net income. By fiscal 2017, the company hopes to double
its base business to the $5–$6 billion range.
The above details were provided by Kennametal at its Analysts Day
meet on Nov 6, 2013. Since then, the company’s share price rose
12.2% and earnings estimates witnessed upward revisions as well.
These are discussed below.
Estimate Revisions Show Potency
Over the last 60 days, the Zacks Consensus Estimate for Kennametal
advanced 0.3% to $2.97 for fiscal 2014 and 1.4% to $3.58 for fiscal
2015. Moreover, Earnings ESP for the company is currently at +4.7%
and +5.0% for the fiscal year 2014 and 2015, respectively. This
indicates high chances of robust performances by the company in the
quarters ahead.
Kennametal currently has a market capitalization of $4.1 billion.
Some better-ranked stocks in the industry include CIRCOR
International, Inc. (CIR), NN Inc. (NNBR)
and Flow International Corporation (FLOW). While
CIRCOR and NN carry a Zacks Rank #1 (Strong Buy), Flow
International has a Zacks Rank #2 (Buy).
CIRCOR INTL (CIR): Free Stock Analysis Report
FLOW INTL CORP (FLOW): Free Stock Analysis Report
KENNAMETAL INC (KMT): Free Stock Analysis Report
NN INC (NNBR): Free Stock Analysis Report
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