Kaman Corporation KAMN, yesterday, reported lower-than-expected results for the fourth quarter of 2017. Adjusted earnings came in at 86 cents, lagging the Zacks Consensus Estimate of 96 cents by 10.4%.
However, on a year-over-year basis, the bottom line grew 53.6% from the year-ago tally of 56 cents on the back of net sales growth and improved margin profile.
For 2017, the company’s adjusted earnings were $2.23 per share, down 0.9% year over year and below the Zacks Consensus Estimate of $2.34.
Segmental Performance Drives Sales
In the quarter, Kaman’s net sales were $473.9 million, reflecting growth of 9.4% from the year-ago tally.
The company reports its net sales under two segments. Segment results are briefly discussed below:
The Distribution segment’s sales in the quarter came in at $263 million, increasing 2.2% year over year. It represented 55.5% of the quarter’s net sales.
Revenues from the Aerospace segment grew 19.9% year over year to $210.9 million. It represented 44.5% of the quarter’s net sales.
For 2017, the company’s net sales were $1,805.9 million, edging down 0.1% year over year.
Lower Proportion of Costs & Expenses Boosts Margins
In the quarter, Kaman’s cost of sales increased 9.2% year over year to $325.2 million. It represented 68.6% of net sales versus 68.7% in the year-ago quarter. Gross margin inched up 10 basis points (bps) year over year to 31.4%. Selling, general and administrative expenses, as a percentage of revenues, were 22.4% compared with 25% in the year-ago quarter.
Adjusted operating income grew 57.1% year over year to $43.4 million while adjusted operating margin came in at 9.2% versus 6.4% in the year-ago quarter. Also, adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were roughly $54 million, up 40.3% year over year. EBITDA margin was up 250 bps to 11.4%.
Balance Sheet & Cash Flow
Exiting the fourth quarter, Kaman had cash and cash equivalents of $36.9 million, above $35.4 million at prior-quarter end. Long-term debt inched down 0.7% sequentially to $391.7 million.
In 2017, Kaman generated net cash of $79.9 million from its operating activities, decreasing 25.8% from the previous year. Capital spending on purchase of property, plant & equipment totaled $27.6 million, below $29.8 million spent in the previous year. Free cash flow came in at $52.3 million, down 32.9% year over year.
Dividends paid in the year totaled $21.5 million.
Outlook
For 2018, Kaman anticipates Distribution segment’s sales to be within $1,100-$1,150 million. The segment’s operating margin is predicted to be within 5.1-5.4%. For the Aerospace segment, sales are predicted to be $750-$780 million and operating margin (adjusted) is anticipated to be 16.2-16.7%.
The company’s interest expenses are estimated to be roughly $20 million while corporate expenses are predicted to be $59 million. Pension benefits are likely to amount to $11.5 million. The tax rate is projected to be within the 25.5-26.5% range.
Net cash from operating activities is expected to be $185-$210 million while capital expenditure is predicted to be $35 million. Free cash flow is projected in a range of $150-$175 million.
Kaman Corporation Price and Consensus
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