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KI

KADANT INC (KAI)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 2026 primary documents (8‑K 2.02 earnings press release and earnings call transcript) were not available in the document catalog or company newsroom; consensus forecasts imply revenue of ~$270.9M and EPS of ~$2.205 for Q1 2026, based on 4 estimates from S&P Global* [GetEstimates].
  • Kadant exited 2025 with strong aftermarket momentum and mixed capital equipment trends: Q3 2025 revenue was $271.6M with 69% parts/consumables and gross margin 45.2%, while adjusted EPS was $2.59 .
  • Management raised FY 2025 revenue guidance to $1.036–$1.046B (maintained adjusted EPS $9.05–$9.25); Q4 2025 guide: revenue $270–$280M, GAAP EPS $1.91–$2.11, adjusted EPS $2.05–$2.25 .
  • Tariffs and capital-project timing remain central narratives; mgmt detailed mitigation levers (surcharges, supplier shifts) and flagged higher 2025 SG&A and net interest expense following acquisitions .
  • Dividend declared $0.34/share payable Feb 5, 2026 may support near-term investor income while the mix normalizes toward capital shipments into 2026 .

What Went Well and What Went Wrong

What Went Well

  • Record aftermarket parts revenue supported margins; Q3 2025 adjusted EBITDA margin 21.4% and gross margin 45.2% as parts/consumables reached 69% of revenue .
  • Management delivered a guidance upgrade on FY 2025 revenue, incorporating acquisitions while maintaining adjusted EPS range, signaling confidence in execution and demand normalization .
  • CEO emphasized operational discipline and customer value delivery despite soft capital demand: “our businesses exceeded our earnings expectations led by record revenue performance in our aftermarket parts business” .

What Went Wrong

  • Capital equipment demand remained sluggish with bookings timing pushed out; Q3 2025 bookings were $238.4M (down ~1%) with softness concentrated in Industrial Processing .
  • Tariffs introduced cost uncertainty and elevated SG&A; mgmt raised 2025 SG&A to ~28.7–29.0% of revenue and net interest expense to ~$14.4M after acquisitions .
  • Sequential margin sensitivity to capital mix was noted; mgmt guided gross margin down to ~44–44.5% for Q4 2025 as mix moderates away from parts .

Financial Results

MetricQ2 2025Q3 2025Q1 2026 Consensus
Revenue ($USD Millions)$255.3 $271.6 $270.9*
GAAP EPS ($USD)$2.22 $2.35 $2.205*
Adjusted EPS ($USD)$2.31 $2.59 N/A
Gross Margin (%)45.9% 45.2% N/A
Adjusted EBITDA ($USD Millions)$52.4 $58.0 $54.1*

Note: *Values retrieved from S&P Global.

Segment Breakdown

Segment Revenue ($USD Millions)Q2 2025Q3 2025
Flow Control$95.9 $94.8
Industrial Processing$95.9 $106.4
Material Handling$63.4 $70.3
Total$255.3 $271.6
Parts & Consumables (%)71% 69%

KPIs

KPIQ2 2025Q3 2025
Bookings ($USD Millions)$269.4 $238.4
Free Cash Flow ($USD Millions)$36.5 $44.1
Ending Backlog ($USD Millions)$299 $273

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FY Revenue ($B)After Q1 2025$1.040–$1.065 $1.020–$1.040 Lowered
FY Adjusted EPS ($)After Q1 2025$9.70–$10.05 $9.05–$9.25 Lowered
FY GAAP EPS ($)After Q1 2025$9.63–$9.98 $8.97–$9.17 Lowered
FY Revenue ($B)After Q2 2025$1.020–$1.040 $1.020–$1.040 Maintained
FY Adjusted EPS ($)After Q2 2025$9.05–$9.25 $9.05–$9.25 Maintained
FY Revenue ($B)After Q3 2025$1.020–$1.040 $1.036–$1.046 Raised
FY GAAP EPS ($)After Q3 2025$8.89–$9.09 $8.52–$8.72 Lowered
FY Adjusted EPS ($)After Q3 2025$9.05–$9.25 $9.05–$9.25 Maintained
Q4 2025 Revenue ($M)After Q3 2025N/A$270–$280 New
Q4 2025 GAAP EPS ($)After Q3 2025N/A$1.91–$2.11 New
Q4 2025 Adjusted EPS ($)After Q3 2025N/A$2.05–$2.25 New
2025 Gross Margin (%)After Q2 202544.8–45.3 45.1–45.4 Raised
2025 SG&A (% of Rev)After Q2 202527.8–28.3 28.7–29.0 Raised
2025 Net Interest ($M)After Q2 202511.5–12.0 ~14.4 Raised
Q4 2025 Tax Rate (%)After Q3 2025N/A~27–27.5 New
Dividend ($/share)Nov 2025N/A$0.34 (payable Feb 5, 2026) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current PeriodTrend
Tariffs/macroQ1 2025: estimated $5–$6M material cost, $0.32–$0.39/share impact; mitigation via surcharges/supplier shifts . Q2 2025: reiterated tariff pressures (steel +25–30%, China import/export) .No Q1 2026 call availableContinued headwind; mitigation ongoing
Aftermarket parts strengthQ1 2025: 75% of revenue; record parts bookings . Q2 2025: 71% of revenue; drove margin beat . Q3 2025: 69% of revenue; record parts led EPS outperformance .N/AStrong and resilient
Capital equipment demandQ1 2025: delays; bookings needed to meet H2 ramp . Q2 2025: improved bookings; fiber processing pipeline . Q3 2025: timing pushing into Q4/early 2026 .N/AMixed; timing sensitivity persists
Regional trendsQ2 2025: NA strongest; China slow; Europe mixed . Q3 2025: factory utilization: US > EU > China; parts overperform vs rates .N/AStable pattern
AcquisitionsClyde ($175M) added to Industrial Processing, ~$92M FY rev ; Q3 call: Q4 EPS dilutive ~$0.02 with interest; Babini dilutive ~$0.04 in Q4 .N/AIntegration underway
Margin outlookMix-driven moderation into Q4 2025 (GM ~44–44.5%) .N/ANear-term moderation expected

Management Commentary

  • CEO (Q3 2025): “Despite a persistent softness in demand for capital equipment and continued global trade uncertainties, our businesses executed well… led by record revenue performance in our aftermarket parts business.”
  • CEO (Q2 2025): “Strong bookings, particularly notable in the current environment of evolving trade policies, demonstrate our customers’ preference for Kadant equipment and technologies…”
  • CFO (Q3 2025): “Our third quarter 2025 adjusted EPS exceeded the high end of our guidance range by $0.36 due to higher‑than‑expected aftermarket parts revenue at our industrial processing segment.”

Q&A Highlights

  • Parts/consumables mix by segment rose YoY (Flow Control 74% vs 70%; Industrial Processing 76% vs 67%) supporting margins and EPS beat .
  • Bookings timing: several large fiber processing projects pending; strict booking requirements (down payments/LOCs) can push orders into early 2026, affecting revenue timing .
  • Tariff impact details: steel price shock addressed; China import/export exposure remains; levers include surcharges and supply reorientation; goal is neutrality over time .
  • Backlog and composition: Q3 backlog $273M, 60% capital ($163M); Clyde backlog marker “use ~$30M” and margin profile fits Industrial Processing .
  • Mix/GM outlook: parts moderation into 2026 as capital normalizes, implying gross margin drift from mid‑46% to mid‑44% range as mix shifts .

Estimates Context

  • Q1 2026 consensus: Revenue ~$270.9M; EPS ~$2.205; EBITDA ~$54.1M; 4 estimates each for revenue and EPS* [GetEstimates].
  • Relative to recent actuals, the Q1 2026 revenue/EPS imply continuity with Q3 2025 run‑rate, but margin sensitivity hinges on parts vs capital mix and acquisition effects (Clyde/Babini dilutive to Q4 adjusted EPS with interest costs) .
  • Estimate revisions may need to reflect: tariff mitigation pace, fiber processing order conversion timing, and SG&A/interest trajectories highlighted by mgmt .

Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Aftermarket strength continues to anchor margins and cash generation; monitor parts mix vs capital normalization for Q1 2026 .
  • Capital project timing is the swing factor; conversion of fiber processing orders will dictate revenue/EPS cadence into 1H 2026 .
  • Tariff exposure persists but is being mitigated; watch for updates on surcharges, supplier shifts, and potential FX impacts .
  • Acquisitions expand Industrial Processing scope; near‑term EPS dilutive with financing costs but strategic fit noted by mgmt .
  • Expect margins to moderate if capital mix rises; Q4 2025 guide implies GM ~44–44.5%—a useful marker for Q1 2026 modeling .
  • Backlog remains healthy; Q3 2025 backlog $273M with ~60% capital, offering visibility as projects release .
  • Dividend support ($0.34 payable Feb 5, 2026) adds yield while investors await capital cycle recovery .