Kaman Corporation (KAMN) reported lower-than-expected second-quarter 2014 results on Aug 4. Since then, the company’s share price has edged down 0.9%, reflecting dissatisfaction among investors.
A brief discussion on Kaman’s second-quarter results is provided below:
Kaman reported earnings from continuing operations of 59 cents per share, down 11.9% from 67 cents earned in the year-ago quarter. The bottom-line result also lagged the Zacks Consensus Estimate of 63 cents per share.
Revenues: Kaman’s net sales grew 6.3% year over year to $459.1 million. However, the top line fell short of the Zacks Consensus Estimate of $468 million. Top-line performance was primarily driven by 12.6% revenue growth in the Distribution segment, partially offset by 4.1% decline in the Aerospace segment.
Margins: Cost of sales climbed 6.2% year over year and, as a percentage of revenue, was 71.8% versus 71.9% in the prior-year quarter. Gross margin inched up 10 basis points (bps) to 28.2%. Selling, general and administrative (SG&A) expenses, as a percentage of revenue, were 22.1% as against 20.9% in the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $36.5 million, down 6.1% year over year. EBITDA margin came in at 8.0%.
Balance Sheet/ Cash Flow: Exiting second-quarter 2014, Kaman had cash and cash equivalents of $11.7 million versus $8.0 million in the preceding quarter. Long-term debt rose by 25.5% sequentially to $350.4 million.
Kaman generated cash of $12.1 million from its operating activities in first-half 2014, improving over $13.4 million used in the year-ago period. Capital spending dropped 15.1% to $18.1 million. Cash dividends paid during the period totaled $8.6 million, up 1.1% from $8.5 million paid in the year-ago period.
Outlook: For 2014, Kaman anticipates its Distribution segment to benefit from the B.W. Rogers acquisition along with increased orders for the Aerospace segment. Sales guidance for the Distribution segment has been raised to $1,190−$1,220 million range from the prior forecast of $1,180−$1,220 million. Operating margin is expected in the 4.8−5.2% range, up from 4.7−5.2% predicted earlier.
For the Aerospace segment, sales guidance has been maintained at $640−$660 million range, while operating margin is anticipated within 16.5−16.7% versus 16.5−17.0% expected earlier.
Capital spending has been reduced to a range of $30−$35 million from the earlier $35−$40 million, while free cash flow guidance has been increased to $50−$55 million range from $43−$48 million estimated previously. Interest and corporate expenses are expected to be $13.5 million and $52 million respectively. Tax rate will be approximately 35%.
With a market capitalization of $1.1 billion, Kaman currently carries a Zacks Rank #2 (Buy). Some better-ranked stocks in the industry include Blount International Inc. (BLT), The Babcock & Wilcox Company (BWC) and DXP Enterprises, Inc. (DXPE). While Blount International sports a Zacks Rank #1 (Strong Buy), both The Babcock & Wilcox and DXP Enterprises hold a Zacks Rank #2 (Buy).
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