Kadant (KAI) Tops Q2 EPS by 7c, Revenues Beat; Lowers FY18 EPS View Due to 'FX & Tariffs,' Boosts FY18 Revenue Outlook

Kadant (NYSE: KAI) reported Q2 EPS of $1.07, $0.07 better than the analyst estimate of $1.00. Revenue for the quarter came in at $155 million versus the consensus estimate of $149.94 million.

• Revenue increased 41% to a record $155 million
• GAAP diluted EPS increased 50% to $1.08
• Adjusted diluted EPS increased 3% to $1.07
• Net income increased 53% to $12 million
• Adjusted EBITDA increased 37% to $26 million and represented 17% of revenue
• Gross margin was 44.0%
• Bookings increased 47% to $176 million
• Backlog increased 8% sequentially to a record $194 million
• Cash flow from operations increased 20% to $28 million

Management Commentary

“The strong start we had to 2018 continued into the second quarter with record revenue and solid EPS performance,” said Jonathan Painter, president and chief executive officer. “The growth in revenue was broad-based across all our product lines and especially strong in North America. Our near-record bookings of $176 million in the second quarter benefited from the robust economy in North America, capacity build-outs in Asia, and our acquisitions. Our book-to-bill ratio for the first six months of 2018 was 1.18, driven by strong growth in bookings in our Stock-Preparation and Fluid-Handling product lines.”

Summary and Outlook

“The strong start to the first half of 2018 has positioned us for another record year of financial performance,” Mr. Painter continued. “However, we expect headwinds from the stronger U.S. dollar and recently implemented tariffs to negatively impact our reported financial results. Since we announced our first quarter results, our full year diluted EPS guidance has been negatively impacted by an unfavorable foreign currency translation effect of $0.19 per diluted share and additional costs of $0.09 per diluted share related to the trade tariffs and, as a result, we are lowering our diluted EPS guidance for 2018. Without these negative factors, we would have raised our full year EPS guidance.

For 2018, we are raising our full year revenue guidance to $630 to $638 million, from our previous guidance of $625 to $635 million. However, we now expect to achieve GAAP diluted EPS of $4.89 to $4.99 in 2018, lowered from our previous guidance of $4.98 to $5.08. The revised 2018 guidance includes pre-tax restructuring costs of $1.5 million, or $0.10 per diluted share, pre-tax amortization expense associated with acquired backlog of $0.3 million, or $0.02 per diluted share, and a discrete tax benefit of $0.1 million, or $0.01 per diluted share. Excluding these expenses, we expect adjusted diluted EPS of $5.00 to $5.10 for 2018, lowered from our previous guidance of $5.15 to $5.25. For the third quarter of 2018, we expect GAAP diluted EPS of $1.35 to $1.40 on revenue of $162 to $166 million. The third quarter of 2018 guidance includes pre-tax restructuring costs of $0.1 million, or $0.01 per diluted share.”

GUIDANCE:

Kadant sees FY2018 EPS of $5.00-$5.10, versus the consensus of $5.11. Kadant sees FY2018 revenue of $630-638 million, versus the consensus of $673.47 million.

For earnings history and earnings-related data on Kadant (KAI) click here.

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