On Jan 14, 2015, we issued an updated research report on Kennametal Inc. (KMT). The outlook appears gloomy for this machinery company, especially amid uncertain global economic conditions.
Presently, market sentiments are not in favor of the companies which are directly or indirectly related to the oil and gas industries. A persistent fall in oil prices is expected to result in lower drilling activities for the oil producing companies, which will, subsequently, lower their capital spending on purchase of machinery and equipments.
In such a scenario, Kennametal’s financials will be adversely impacted as it sources a considerable portion of revenues from its oil and gas customers. Adding to the concerns are expectations of lower demand in Eurozone and a decline in underground mining production levels.
Also, Kennametal’s huge international presence has exposed it to risks arising from negative foreign currency translation and geo-political issues, among others. Moreover, the company secures a major portion of its raw materials from non-U.S. countries, thus raising concerns over its availability and price fluctuations.
Disappointing outlook has led to a downward revision in the earnings estimates for Kennametal. Over the last 30 days, the Zacks Consensus Estimate has decreased 1.4% to $2.76 for fiscal 2015 and 2.5% to $3.12 for fiscal 2016. Also, the company has an Earnings ESP of -2.54% for fiscal 2015 and -2.89% for fiscal 2016.
With a market capitalization of $2.5 billion, Kennametal currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the machinery industry include Kadant Inc. (KAI), CUI Global, Inc. (CUI) and Pioneer Power Solutions, Inc. (PPSI). All these stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment