Machinery company Kennametal Inc. KMT recently lowered its earnings guidance for fiscal 2016 (ending Jun 2016) citing weakening end-market conditions as the primary reason. This development took place a couple of weeks after the company announced divestiture of certain non-core assets to Madison Industries.
Kennametal announced that its top-line will suffer setbacks from difficult operating conditions in the oil & gas industry as well as slowdown in the Chinese automotive market. Also, the company anticipates the weaknesses in the U.S. and Chinese coal mining markets to adversely impact its top line.
As revenues will likely decline, Kennametal now anticipates its earnings per share to fall in a range of 30−60% for fiscal 2016. Earlier in Nov 2015, the company had guided fiscal 2016 adjusted earnings within $1.50−$1.70 per share.
Market sentiments have been weak for Kennametal, with the share price declining 8.1%, since the company reported disappointing first-quarter fiscal 2016 results on Nov 3. The reduced guidance will likely keep investors apprehensive about the company’s prospects.
Kennametal specializes in manufacturing high-speed metal cutting tools, tooling systems and wear-resistant parts for use in industrial and infrastructure end markets. To combat the adverse impact of weak end-markets and uncertain global conditions as well as to improve profits, the company has been working toward developing a sound cost structure by rationalizing certain manufacturing facilities and reducing expenses.
With a market capitalization of $2 billion, Kennametal currently carries a Zacks Rank #3 (Hold). Better-ranked companies in the same sector include Encore Wire Corp. WIRE, Unifi Inc. UFI and John Bean Technologies Corporation JBT. While Encore Wire sports a Zacks Rank #1 (Strong Buy), both Unifi and John Bean Technologies 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 >>
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
Be the first to comment