Kadant Inc. (KAI) | Investment Case

1. Company Snapshot

1.a. Company Description

Kadant Inc.supplies technologies and engineered systems worldwide.It operates through three segments: Flow Control, Industrial Processing, and Material Handling.

The Flow Control segment develops, manufactures, and markets fluid-handling systems and equipment, such as rotary joints, syphons, turbulator bars, expansion joints, and engineered steam and condensate systems; and doctoring, cleaning, and filtration systems and related consumables, consisting of doctor systems and holders, doctor blades, shower and fabric-conditioning systems, formation systems, and water-filtration systems.The Industrial Processing segment develops, manufactures, and markets ring and rotary debarkers, stranders, chippers, logging machinery, industrial automation and control systems, recycling and approach flow systems, and virgin pulping process equipment for use in the packaging, tissue, wood products, and alternative fuel industries.The Material Handling segment offers conveying and vibratory equipment, and balers and related equipment; and manufactures and sells biodegradable absorbent granules for carriers in as carriers in agricultural, home lawn and garden, professional lawn, turf, and ornamental applications, as well as for oil and grease absorption.

The company was formerly known as Thermo Fibertek Inc.and changed its name to Kadant Inc.in July 2001.

Kadant Inc.was incorporated in 1991 and is headquartered in Westford, Massachusetts.

Show Full description

1.b. Last Insights on KAI

Kadant Inc.'s recent performance was negatively impacted by a technical breakdown in its stock price, signaling potential selling pressure and underperformance ahead. Despite beating Q3 earnings and revenue estimates with $2.59 per share, a decline from $2.84 per share a year ago, may have raised concerns. The company's acquisition of Clyde Industries for $175 million, aimed at expanding its industrial processing reach, may pose integration risks. Additionally, while institutional investors like World Investment Advisors and Ethic Inc. have increased their stakes, this may not be enough to offset potential near-term challenges.

1.c. Company Highlights

Last Price	288.03
Change Percentage	-1.01%
Open	290.17
Previous Close	290.98
Market Cap ( Millions)	3392
Volume	82799
Year High	420.74
Year Low	244.87
M A 50	282.85
M A 200	315.96

FCF Yield	4.30%
Dividend Yield	0.47%
ROE	11.33%
Debt / Equity	27.16%
Net Debt / EBIDTA	59.54%
Price To Book	3.57
Price Earnings Ratio	33.25
Price To FCF	23.25
Price To sales	3.31
EV / EBITDA	16.0

2. Kadant's Q3 2025 Earnings: A Mixed Bag

Kadant's third-quarter 2025 financial performance was marked by a flat revenue of $271.6 million, with record aftermarket parts revenue of $188.4 million. The company's gross margin stood at 45.2%, up 50 basis points from the previous year. GAAP EPS decreased 12% to $2.35, while adjusted EPS decreased 9% to $2.59, beating analyst estimates of $2.18. The adjusted EBITDA margin was 21.4%, and cash flow from operations and free cash flow were $47 million and $44 million, respectively.

Publication Date: Nov -02

                                    📋 Highlights
                                    Aftermarket Parts Revenue Record:
                                                Surpassed $188.4 million, up 6% YoY, driving 21.4% adjusted EBITDA margin.
Q3 Revenue Flat:
                                                Remained stable at $272 million, with $47 million cash flow from operations and $44 million free cash flow.
Industrial Processing Segment:
                                                Generated $81 million in aftermarket parts revenue, but revenue declined 4% and EBITDA margin fell 330 bps to 25.4%.
Revised Revenue Guidance:
                                                Raised to $1.36–1.46 billion from $1.02–1.04 billion, reflecting acquisition integration and capital bookings delays.
Clyde Acquisition Impact:
                                                Expected to add $23–25 million in Q4 revenue but be dilutive due to $4–5 million interest charges.

                                

Segmental Performance

The Flow Control segment saw a 3% decline in revenue, while new order activity was up 5%. The Industrial Processing segment's revenue decreased 4%, but aftermarket parts revenue reached a record $81 million. Adjusted EBITDA margin for this segment was 25.4%, down 330 basis points from the previous year. As Jeffrey Powell noted, "We're seeing improved activity and opportunities on the capital side, particularly in the Industrial Processing business."

Guidance Revision

The company revised its revenue guidance range to $1.36 billion to $1.46 billion, up from $1.02 billion to $1.04 billion. This revision is largely due to the inclusion of operating results and associated borrowing costs from recent acquisitions, including Clyde Industries. Michael McKenney mentioned that Clyde and Babbini will contribute around $23-25 million in revenue in the fourth quarter.

Valuation and Outlook

With a P/E Ratio of 31.93 and an EV/EBITDA of 16.44, Kadant's valuation appears to be relatively high. Analysts estimate revenue growth at 7.8% for next year. Given the current level of uncertainty and volatility, it's uncertain whether the company will be able to meet these expectations. However, with a strong track record of aftermarket parts revenue and a solid backlog of $273 million, Kadant is well-positioned to navigate the challenges ahead.

Operational Highlights

The company's operational improvements, including the 80/20 performance enhancement program, are expected to drive growth. The integration of Clyde Industries and other recent acquisitions is also expected to contribute to the company's progress. As Jeffrey Powell stated, "We expect the second half of 2025 to show improvement across various metrics despite global trade turmoil and societal challenges."

3. NewsRoom

Advantage Alpha Capital Partners LP Takes $2.75 Million Position in Kadant Inc $KAI

Nov -28

Source: defenseworld.net

Commonwealth of Pennsylvania Public School Empls Retrmt SYS Has $960,000 Stock Holdings in Kadant Inc $KAI

Nov -24

Source: defenseworld.net

Bank of Montreal Can Has $878,000 Stock Position in Kadant Inc $KAI

Nov -16

Source: defenseworld.net

Kadant Declares Cash Dividend

Nov -13

Source: globenewswire.com

World Investment Advisors Purchases Shares of 1,484 Kadant Inc $KAI

Nov -04

Source: defenseworld.net

Ethic Inc. Purchases 215 Shares of Kadant Inc $KAI

Oct -30

Source: defenseworld.net

Kadant Inc. (KAI) Q3 2025 Earnings Call Transcript

Oct -29

Source: seekingalpha.com

Kadant (KAI) Beats Q3 Earnings and Revenue Estimates

Oct -28

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.79%)

6. Segments

Flow Control

Expected Growth: 6.5%

Kadant Inc.'s Flow Control segment growth of 6.5% is driven by increasing demand for efficient fluid handling systems in the pulp and paper industry, coupled with the company's strategic expansion into emerging markets and innovative product offerings. Additionally, growing adoption of automation and digitalization in manufacturing processes is fueling demand for Kadant's flow control solutions.

Industrial Processing

Expected Growth: 6.8%

Kadant Inc.'s Industrial Processing segment growth of 6.8% is driven by increasing demand for sustainable and efficient processing solutions, expansion in emerging markets, and strategic acquisitions. Additionally, growing adoption of automation and digitalization in industries such as pulp and paper, and food processing, is also contributing to the segment's growth.

Material Handling

Expected Growth: 7.2%

Kadant's Material Handling segment growth of 7.2% is driven by increasing demand for automation and efficiency in manufacturing processes, particularly in the packaging and e-commerce industries. Additionally, the segment benefits from the company's strategic acquisitions and investments in product development, enhancing its offerings and expanding its customer base.

7. Detailed Products

Stock Preparation Systems

Kadant's stock preparation systems are designed to optimize the pulping and screening process, providing high-quality pulp for paper, tissue, and packaging applications.

Doctoring, Creping, and Filtration Systems

Kadant's doctoring, creping, and filtration systems are designed to improve paper machine efficiency, reduce waste, and enhance product quality.

Rolling Machine Systems

Kadant's rolling machine systems are designed to improve the winding and unwinding process, reducing waste and improving product quality.

Aerospace and Industrial Products

Kadant's aerospace and industrial products are designed to provide high-performance solutions for demanding applications.

Water Management Systems

Kadant's water management systems are designed to optimize water usage, reduce waste, and improve environmental sustainability.

8. Kadant Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Kadant Inc. operates in a niche market, and the threat of substitutes is moderate. While there are some alternative products available, they are not as effective or efficient as Kadant's products.

Bargaining Power Of Customers

Kadant Inc.'s customers are largely dependent on the company's products, and the bargaining power of customers is low. The company has a strong reputation and a wide range of products, making it difficult for customers to negotiate prices.

Bargaining Power Of Suppliers

Kadant Inc. has a diverse supplier base, and the bargaining power of suppliers is moderate. While some suppliers may have some negotiating power, the company's size and reputation help to mitigate this risk.

Threat Of New Entrants

The threat of new entrants in Kadant Inc.'s market is low. The company has a strong brand and a significant market share, making it difficult for new entrants to gain traction.

Intensity Of Rivalry

The intensity of rivalry in Kadant Inc.'s market is high. The company operates in a competitive industry, and there are several established players competing for market share.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	12.99%
Debt Cost	8.57%
Equity Weight	87.01%
Equity Cost	10.46%
WACC	10.21%
Leverage	14.92%

11. Quality Control: Kadant Inc. passed 8 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Graco

A-Score: 5.3/10

Value: 2.2

Growth: 5.2

Quality: 8.5

Yield: 2.0

Momentum: 4.0

Volatility: 10.0

1-Year Total Return ->

Franklin Electric Co

A-Score: 5.1/10

Value: 3.0

Growth: 6.8

Quality: 6.6

Yield: 2.0

Momentum: 3.0

Volatility: 9.0

1-Year Total Return ->

IDEX

A-Score: 4.8/10

Value: 3.1

Growth: 4.9

Quality: 7.9

Yield: 3.0

Momentum: 2.0

Volatility: 8.0

1-Year Total Return ->

Nordson

A-Score: 4.7/10

Value: 2.4

Growth: 5.0

Quality: 6.8

Yield: 2.0

Momentum: 3.0

Volatility: 8.7

1-Year Total Return ->

Flowserve

A-Score: 4.7/10

Value: 4.7

Growth: 4.6

Quality: 7.4

Yield: 3.0

Momentum: 4.0

Volatility: 4.3

1-Year Total Return ->

Kadant

A-Score: 4.2/10

Value: 2.4

Growth: 6.4

Quality: 7.0

Yield: 0.0

Momentum: 3.5

Volatility: 6.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

11.47%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

10.21%

Kadant Inc. - US48282T1043

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on KAI

1.c. Company Highlights

Expensive

Higher Growth

Better Quality

Earnings Beats

Revenues Miss

Revenues Beats

Strong Momentum

Average Growth

Stable Momentum

Average Yield

Average Quality

2. Kadant's Q3 2025 Earnings: A Mixed Bag

Segmental Performance

Guidance Revision

Valuation and Outlook

Operational Highlights

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.79%)

6. Segments

Flow Control

Expected Growth: 6.5%

Industrial Processing

Expected Growth: 6.8%

Material Handling

Expected Growth: 7.2%

7. Detailed Products

Stock Preparation Systems

Doctoring, Creping, and Filtration Systems

Rolling Machine Systems

Aerospace and Industrial Products

Water Management Systems

8. Kadant Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Kadant Inc. passed 8 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

288.03$

Current Price

288.03$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA