Kadant Inc. – Value |
Who says the paper industry can't be glamorous? Kadant Inc. (KAI) is trading near multi-year highs as earnings are expected to jump by over 50% in 2011. This Zacks #1 Rank (strong buy) is also a value stock, with a forward P/E of 14.6.
Kadant supplies technology-based systems to the global pulp and paper industries through fluid handling which transfer fluids, steam or air between rotating cylinders and fixed piping, doctoring which involves cleaning roll surfaces to keep machines running, and water-management equipment designed to clean fabrics.
Some of its businesses have been in operation for over 100 years. The company has employees in 16 countries.
No Surprise…But Kadant Surprised Again in Q1
On Apr 27, Kadant reported first quarter results and, surprise!, beat the Zacks Consensus Estimate for the 20th consecutive time.
It is an impressive earnings surprise history going back 5 years. Very few companies were able to keep their earnings surprise streaks alive during the Great Recession.
Check out the rare perfect score on the 5-year surprise chart.
Earnings per share were 47 cents compared to the Zacks Consensus of 36 cents, for a 30.6% beat. This was well over the company's own guidance of 35 to 37 cents.
Why the big beat?
The company saw record quarterly gross margins of 47.6%, with strong margin gains across all product lines.
The increase was due to record quarterly gross margins of 47.6 percent, with strong margin performances across all our product lines and territories.
Revenues jumped 17% to $71.7 million. Consolidated bookings rose 20% to $84.3 million.
With a book-to-bill ratio of 1.2, the company had one of its highest backlogs ever, at $109.3 million, by the end of the quarter.
The fluid handling segment had bookings of $27 million, its highest level in about 3 years.
Strong Cash Position
At the end of the first quarter, Kadant finished with $57.6 million in cash and $17.6 million in total debt.
Its net cash position, of $40 million, was up $19.5 million from the first quarter of 2010.
Full Year Guidance Raised
Given the strong first quarter and rising backlog, the company increased its full year EPS guidance to a range of $2.15 to $2.25 from the prior guidance of $1.65 to $1.75 per share.
Revenue is also expected to be higher, between $315 to $325 million from $300 to $310 million.
Zacks Consensus Estimates Jump
Analysts are as bullish as the company about 2011.
The 2011 Zacks Consensus Estimate jumped to $2.19 from $1.70 in the last 3 months. That is in the middle of the company's revised guidance range.
Earnings are expected to jump 55% over 2010.
The double digit earnings growth is forecast to continue into 2012 as analysts are calling for another 18% EPS growth with the 2012 Zacks Consensus climbing to $2.58 per share.
There's Value Even as Shares Soar
Kadant has been screaming higher since the 2009 lows and is now near 5-year highs.
But there is still value in the stock. In addition to a P/E under 15, which is what I use as a cut-off for "value" stocks, Kadant has a price-to-book ratio of 1.8. A P/B ratio under 3.0 usually indicates value.
Kadant has the magical combination of both growth and value. This will be a stock to watch when it reports its second quarter results on July 27.
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