Will Kennametal (KMT) Miss Earnings Estimates? - Analyst Blog

Kennametal Inc. KMT is slated to report its third-quarter fiscal 2014 (ended Mar 2014) results before the market opens on May 1. In the last-reported quarter, the company reported lower-than-expected results with a negative earnings surprise of 14.75%.

Let us see how things are shaping up for fiscal third-quarter 2014 earnings release.

Factors to Influence Q3 Results

Kennametal's disappointing fiscal second-quarter 2014 (ended Dec 2013) results as well as a weak outlook for fiscal 2014 have made investors dubious of improved results for fiscal third quarter.

To date, no major improvement has been recorded in the company's share price (still down by 3.1%) since the announcement of fiscal second-quarter results on Jan 30. Also, in the last 60 days, the Zacks Consensus Estimate has fallen by 1.1% to $2.63 for fiscal 2014 and by 1.5% to $3.31 for fiscal 2015.

A brief snapshot of fiscal 2014 outlook is provided below:

For fiscal 2014, Kennametal lowered its organic revenue growth guidance to a range of 2−4% from 4−6% expected earlier. The earnings per share guidance has been lowered to a range of $2.60–$2.75 from $2.90–$3.05 expected earlier.

The revision is a result of lower-than-anticipated growth in the oil and gas markets served by Kennametal and continued weakness in underground mining in the U.S. and China. In addition to this, we believe that adverse weather conditions that impacted the U.S. industrial activities in the first quarter of calendar year 2014, will negatively affect the company's results.   

Earnings Whispers?

Our proven model does not conclusively show that Kennametal is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Kennametal has an ESP of -2.78% for fiscal third-quarter 2014, which indicates the difference between the Most Accurate estimate of 70 cents and the Zacks Consensus Estimate of 72 cents.

Zacks Rank: Kennametal carries a Zacks Rank #3 (Hold), which together with a negative ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Mobile Mini, Inc. MINI, with Earnings ESP of +5.26% and a Zacks Rank #2 (Buy).

Gorman-Rupp Co. GRC, with Earnings ESP of +2.50% and a Zacks Rank #3.

Manitex International, Inc. MNTX, with Earnings ESP of +5.56% and a Zacks Rank #3.