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Kadant (KAI) Stock Rises 23% in 3 Months: What's Driving It?

Kadant (KAI) benefits from strengthening market demand and backlog, solid operational execution and gains from acquired assets.

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This story originally appeared on Zacks

Shares of Kadant Inc. KAI have jumped an impressive 23% in the past three months. Its solid fundamentals, along with sound financial performance and earnings prospects, support the price momentum. It presently sports a Zacks Rank #1 (Strong Buy).



The company engages in manufacturing and supplying engineered systems and components for use in process industries across the globe. It belongs to the Zacks Manufacturing - General Industrial  industry, which is in the top 29% (with a rank of 73) of more than 250 Zacks industries. It is based in Westford, MA, and has a market capitalization of $2.4 billion.



In the past three months, the industry has declined 0.3%. The S&P 500 has gained 7.7% during the same period and the Zacks Industrial Products sector has advanced 1.6%.

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Factors Influencing the Stock

In the past three months, Kadant delivered impressive second-quarter 2021 results. Its earnings surpassed the Zacks Consensus Estimate by 33.11% and expanded 90% from the year-ago quarter. Sales surprise in the quarter was 9.96%. Bookings were solid and backlog was $242 million exiting the quarter.



Other than sound financial performance, Kadant’s solid product offerings, impressive order activities and backlog, and strengthening demand in markets are some other tailwinds for the quarters ahead. Also, the company’s solid operational execution and synergistic gains from buyouts (explained below) are beneficial.



For 2021, Kadant anticipates revenues to be $783-$793 million, higher than the prior expectation of $710-$730 million. Also, the company’s sound shareholder-friendly policies raise its appeal. Recently, the company paid a quarterly dividend of 32 cents per share to its shareholders, while any shares repurchased in the past three months might have added to shareholders’ value. The company announced a $20 million worth of shares buyback program in May.



Regarding the company’s inorganic actions, Kadant acquired Balemaster — the U.S.-based manufacturer of balers and other automated waste-handling equipment — for $54 million in cash. Balemaster will be integrated with Kadant’s Material Handling segment. Also, the company acquired Joh. Clouth GmbH & Co. KG along with its affiliates through its subsidiary, Kadant Germany Holding GmbH. This buyout was done in third-quarter 2021. Joh. Clouth will be part of Kadant’s Flow Control segment.



The Zacks Consensus Estimate for the company’s earnings per share is pegged at $7.41 for 2021 and $8.81 for 2022, marking increases of 22.1% and 32.1% from the respective 90-day-ago figures. The consensus estimate for third-quarter earnings improved from $1.51 per share to $1.64. Such upward revisions in earnings estimates are reflective of healthy operating conditions for the company.

Kadant Inc Price and Consensus

Kadant Inc Price and Consensus

Kadant Inc price-consensus-chart | Kadant Inc Quote

Kadant’s Performance Versus Industry Players

Kadant’s performance in the past three months has been better than Dover Corporation DOV, Manitex International, Inc. MNTX and Applied Industrial Technologies, Inc. AIT. The companies belong to the same industry as Kadant. In the past three months, Dover’s shares have gained 16% and Manitex expanded 4.7%, while Applied Industrial declined 6.6%.



Manitex sports a Zacks Rank #1 while both Dover and Applied Industrial presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.



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