Kadant's record quarter barely moved its annual profit outlook
Kadant's quarterly adjusted EPS topped its earlier forecast. Our comparison weighs the modest annual upgrade against stronger orders and cash flow.
Ticker Byline
Kadant Inc.
Kadant supplies process equipment, parts and consumables. Record quarterly results and stronger organic bookings accompany a modest annual earnings forecast increase, with acquired growth and cash generation shaping the comparison.
- Ticker
- KAI
- Exchange
- XNYS
- SEC CIK
- 0000886346
Kadant Inc. (NYSE: KAI) supplies equipment, engineered systems, replacement parts and consumables for process industries. Customers include paper and packaging producers, wood processors, mining businesses and other industrial operators. Its businesses are grouped into Flow Control, Industrial Processing and Material Handling.
The latest reported quarter ended October 3, 2026. Fiscal 2026 ends January 2, 2027. Replacement parts and consumables supplied 70% of third-quarter revenue, providing a different demand source from large equipment projects.
Record results, with acquisitions contributing
| Measure | 2026 | 2025 |
|---|---|---|
| Revenue | 313.2 | 271.6 |
| GAAP operating income | 53.6 | 42.6 |
| GAAP net income attributable to Kadant | 35.1 | 27.7 |
| GAAP diluted EPS | $2.96 | $2.35 |
| Adjusted diluted EPS | $3.64 | $3.01 |
| Adjusted EBITDA margin | 22.9% | 21.4% |
| Operating cash flow | 62.9 | 47.3 |
Acquisitions contributed $31 million of revenue. Total sales increased 15%, compared with 4% organic growth, which excludes acquisitions for their first four quarters and currency movements. Bookings rose 22% to $291.1 million, including 10% organic growth.
Flow Control and Industrial Processing grew sales. Material Handling's revenue fell to $67.4 million from $70.3 million, and adjusted EBITDA declined, although its bookings increased. Group gross margin fell to 44.7% from 45.2%, even as the adjusted EBITDA margin improved.
How adjusted earnings differ
Kadant changed its adjusted earnings definition in February to exclude amortization of acquired intangible assets. The $3.01 year-earlier EPS comparison has been recalculated on that basis; the originally reported $2.59 used the older definition.
Current adjusted net income adds $6.6 million of after-tax intangible amortization, about $1 million of acquired inventory and backlog amortization, and $0.4 million of acquisition costs to $35.1 million of GAAP parent net income, producing $43.1 million. Adjusted EBITDA separately adds interest, income taxes, depreciation, amortization and specified costs to earnings.
What changed in the forecast
The August forecast called for quarterly adjusted EPS of $2.90 to $3. Actual EPS of $3.64 exceeded that range. The full-year range increased from $12.43–$12.68 to $12.58–$12.73, a 10-cent midpoint increase.
Annual revenue is now expected at $1.195 billion to $1.210 billion, versus $1.190 billion to $1.210 billion. Fourth-quarter guidance calls for revenue of $287 million to $302 million and adjusted EPS of $2.67 to $2.82. Annual GAAP EPS guidance is $9.88 to $10.03.
Cash, debt and completed acquisitions
Quarterly operating cash flow of $62.9 million less $4.8 million of capital spending produced $58.1 million of free cash flow. Nine-month free cash flow was $119.4 million. Capital spending included a $5.8 million purchase of a previously leased manufacturing facility in the second quarter.
Debt obligations fell from $508.2 million in July to $453.1 million in October, but remained above January's $372.7 million. October's $138.6 million cash subtotal includes restricted cash. The presentation separately lists $2.1 million of other borrowings as lease obligations.
The credit-facility leverage ratio improved to 1.49 times from 1.72. It deducts at most $50 million of worldwide cash and uses a contractually adjusted earnings denominator.
Kadant completed its acquisition of the Profil industrial knife and rolled-profile businesses on April 30, primarily using revolving credit. Its second-quarter report valued the purchase at $170.1 million after acquired cash and a noncash settlement. That transaction and the October 2025 acquisition of Clyde Industries predate these results.
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