NEW YORK (TheStreet) -- Kennametal Inc. (KMT - Get Report) stock is lower 4.13% to $43.19 on Monday after a ratings downgrade to "underperform" from "neutral" at Bank of America (BAC - Get Report) Merrill Lynch due to weaker core incrementals.
The firm's current price objective on the stock is $42.00, down from their previous price objective of $45.00. This is the second time Bank of America/Merrill Lynch lowered their rating for Kennametal Inc. in seven months.
TheStreet Ratings team rates KENNAMETAL INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
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"We rate KENNAMETAL INC (KMT) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 17.2%. Since the same quarter one year prior, revenues slightly increased by 9.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.61, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.
- KENNAMETAL INC's earnings per share declined by 42.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, KENNAMETAL INC reported lower earnings of $2.52 versus $3.78 in the prior year. This year, the market expects an improvement in earnings ($2.66 versus $2.52).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: KMT Ratings Report