NEW YORK (TheStreet) -- Kennametal(KMT) - Get Report stock is plummeting 13.88% to $22.02 on heavy volume in morning trading on Tuesday after the company cut its fiscal 2016 guidance to reflect lowered demand from end markets and from China in particular.
Yesterday afternoon, Kennametal slashed its per-share adjusted earnings expectations by 30% to 60%, according to a statement. Kennametal had previously forecast for per-share adjusted earnings of $1.50 to $1.70.
Similarly, diversified technology company 3M (MMM) reduced its fiscal 2015 earnings expectations this morning in light of the broader economic downturn.
However, 3M's revised expectations should not surprise investors since the global economic slowdown has been "telegraphed" for a while now, TheStreet's Jim Cramer said on CNBC's Squawk on the Street this morning.
Kennametal's guidance cut was "not telegraphed, obviously," Cramer noted.
He pointed out that Kennametal's company name has the word "metal" in it, and given metals' falling prices, investors should sell the stock.
Cramer added that shares of equipment manufacturer Caterpillar (CAT) will likely be dragged down by Kennametal's guidance reduction.
About 3.71 million shares of Kennametal have been traded so far today, well above their average trading volume of roughly 1.03 million shares per day.
Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate KENNAMETAL INC as a Hold with a ratings score of C-. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The current debt-to-equity ratio, 0.57, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.14, which illustrates the ability to avoid short-term cash problems.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 21.6%. Since the same quarter one year prior, revenues fell by 20.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- KENNAMETAL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, KENNAMETAL INC swung to a loss, reporting -$4.72 versus $1.99 in the prior year. This year, the market expects an improvement in earnings ($1.50 versus -$4.72).
- The gross profit margin for KENNAMETAL INC is currently lower than what is desirable, coming in at 32.08%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -1.12% trails that of the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Machinery industry. The net income has significantly decreased by 115.8% when compared to the same quarter one year ago, falling from $39.49 million to -$6.23 million.
- You can view the full analysis from the report here: KMT