Kennametal Inc. Upped to Strong Buy on Bright Prospects

Zacks Investment Research upgraded Kennametal Inc. KMT to a Zacks Rank #1 (Strong Buy) on Jan 12, 2017. Going by the Zacks model, companies sporting a Zacks Rank #1 have strong chances of outperforming the broader market.

After the release of first-quarter fiscal 2017 (ended Sep 30, 2016) results on Oct 26, Kennametal’s shares yielded a 22.4% return, outperforming the return of 6.9% generated by the Zacks categorized Machine Tools & Related Products industry.

Why the Upgrade?

Market sentiments have been favoring Kennametal Inc. for quite some time now, especially after the company provided promising outlook at its first-quarter fiscal 2017 conference call. For fiscal 2017, the company anticipates sales to be approximately $2 billion while predicts adjusted earnings to be within $1.20−$1.50 range, above the previous projection of $1.10−$1.40 per share. Cash flow from operating activities is projected in a range of $215−$245 million, up from $190−$230 million expected earlier, while capital spending is anticipated within $125−$135 million versus the earlier projected range of $100−$120 million. Free cash flow will likely come in a band of $90−$110 million.

In addition, 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 reduction initiatives and others to yield pre-tax savings of approximately $140−$155 million. Of these programs, the company predicts its headcount reduction initiatives to result in estimated annualized savings of $65 million by Jun 2017, while other programs are likely to generate savings of $75−$90 million by Dec 2018.

Investors seem to be optimistic about Kennametal Inc.’s future prospects, as evident from upward revisions in earnings estimates for the stock. Over the last 60 days, the Zacks Consensus Estimate for the company increased 0.8% to $1.31 per share for fiscal 2017 and 0.1% to $1.64 per share for fiscal 2018. Also, the company has an Earnings ESP of +6.11% for fiscal 2017 and +14.02% for fiscal 2018.

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Kennametal Inc. Price and Consensus

Kennametal Inc. Price and Consensus | Kennametal Inc. Quote

Other Stocks to Consider

Kennametal Inc. has a market capitalization of $2.8 billion. Other stocks worth considering in the machinery industry include Altra Industrial Motion Corporation AIMC, Broadwind Energy, Inc. BWEN and Sandvik AB SDVKY. While Altra Industrial Motion sports a Zacks Rank #1, both Broadwind Energy and Sandvik AB carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.     

Altra Industrial Motion Corporation reported better-than-expected results in the last four quarters, with an average positive earnings surprise of 8.06%. Also, bottom-line expectations for 2017 improved over the past 60 days.

Broadwind Energy, Inc.’s earnings estimates for 2017 have been revised upward over the last 60 days.

Sandvik AB’s earnings estimates for 2017 represent year-over-year growth of 2.73%.

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Kennametal Inc. (KMT): Free Stock Analysis Report
 
Sandvik AB (SDVKY): Free Stock Analysis Report
 
Altra Industrial Motion Corp. (AIMC): Free Stock Analysis Report
 
Broadwind Energy, Inc. (BWEN): Free Stock Analysis Report
 
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