Kaman Corporation KAMN reported in-line results for third-quarter 2015. Adjusted earnings from continuing operations came in at 62 cents per share, at par with the Zacks Consensus Estimate. However, the bottom line lagged the year-ago tally of 64 cents per share.
Revenues
Kaman’s net sales from continuing operations totaled $433.7 million, down 4.9% year over year. Also, the top line lagged the Zacks Consensus Estimate of $458 million.
The company reports its net sales under two heads/segments. The segmental results are briefly discussed below:
The Distribution segment generated sales of $296.3 million, decreasing 2% year over year. Organic revenues grew 7.4%, while revenues from the Aerospace segment declined 10.6% year over year to $137.4 million.
Margins
Kaman’s cost of sales in the quarter decreased 7% year over year, representing 70% of total revenue as against 71.6% in the year-ago quarter. Gross margin improved 160 basis points year over year to 30%. Selling, general and administrative (SG&A) expenses, as a percentage of revenues, were 23.1% as against 28.4% recorded in the year-ago quarter.
Operating income increased 9.3% year over year to $29.8 million, while margin came in at 6.9% compared with 6% in the year-ago quarter.
Balance Sheet
Exiting third-quarter 2015, Kaman’s cash and cash equivalents were $11.6 million compared with $11.5 million in the preceding quarter. Long-term debt decreased 6.4% sequentially to $251.1 million.
Cash Flow
In the first nine months of 2015, Kaman generated cash of $84.8 million from its operating activities compared with $43.8 million in the year-ago period. Capital spending totaled $23.1 million, while free cash flow came in at $61.7 million.
During the period, Kaman distributed $14.1 million as dividends.
Outlook: For 2015, Kaman lowered its sales projection for the Distribution segment to $1,175−$1,200 million from the prior forecast of $1,200−$1,225 million. Operating margin is expected roughly in a range of 4.6−4.7% versus the earlier forecast of 4.8−5.0%. The revisions were triggered by weak demand for the segment’s products.
Aerospace sales are projected within $600−$610 million, down from $610−$620 million predicted earlier. Operating margin is expected to be roughly 19.3−19.5% as against the earlier forecast of 18.1%−18.4%.
Interest expense is estimated at approximately $13 million, while corporate expense is predicted to fall within $54−$55 million. Tax rate is projected at 31%.
Net cash generation from operating activities will lie roughly within $105−$130 million, while capital expenditure will likely be $30−$40 million. Free cash flow is forecasted in a range of $75−$90 million.
With a market capitalization of $1.1 billion, Kaman currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the industry include Energous Corporation WATT, Powell Industries, Inc. POWL and Middleby Corp. MIDD. While Energous Corporation sports a Zacks Rank #1 (Strong Buy), both Powell Industries and Middleby Corp. hold a Zacks Rank #2 (Buy).
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