Kadant's record quarter barely moved its annual profit outlook
A large quarterly adjusted profit beat produced a small annual upgrade. Organic orders and cash flow strengthened as acquisitions added to reported growth.
Kadant delivered record sales, adjusted earnings and operating cash flow in its third quarter. It also beat its own earlier quarterly targets. The resulting increase in its annual profit forecast was much smaller.
The industrial equipment supplier earned an adjusted $3.64 per share in the quarter ended October 3, above the $2.90 to $3 range it had set in August. It now expects $12.58 to $12.73 for the full fiscal year, compared with $12.43 to $12.68 previously.
A large quarter, a small annual change
Research by Ticker Byline shows that quarterly adjusted EPS beat the August forecast midpoint by 69 cents. The annual midpoint rose just 10 cents, or about 0.8%.
The sales comparison follows a similar pattern. Quarterly revenue of $313.2 million exceeded the old $307 million ceiling. The annual sales forecast midpoint increased by only $2.5 million, to about $1.203 billion.
Kadant's new fourth-quarter forecast calls for adjusted EPS of $2.67 to $2.82. Management expects stable demand for aftermarket parts and some improvement in project activity, while the timing of large equipment orders remains uncertain.
Orders show improvement beyond acquisitions
That restrained annual upgrade accompanies real operating progress. Bookings rose 22% from a year earlier to $291.1 million. Excluding acquisitions and currency movements, they increased 10%, following a 1% decline on the same year-over-year basis in the second quarter.
Acquisitions supplied $31 million of quarterly revenue, helping explain why total sales rose 15% while organic sales increased 4%. Kadant's own earnings bridge attributes 50 cents of the 63-cent year-over-year adjusted EPS increase to acquisitions.
Performance also varied by business. Flow Control's adjusted profit margin improved, while Material Handling's sales and adjusted earnings fell despite higher orders. Parts and consumables supplied 70% of group revenue.
Cash provides a stronger counterweight
Operating cash flow increased 33% to $62.9 million. After $4.8 million of capital spending, Kadant reported $58.1 million of free cash flow, up 32%. GAAP net income attributable to Kadant rose 27% to $35.1 million.
Adjusted EPS removes acquired-intangible amortization and acquisition-related costs. The comparable year-earlier figure is $3.01 under the company's updated definition.
The Kadant company profile follows the forecast, acquisition history and debt behind that comparison.