Why Kennametal Inc.'s Shares Popped 10% Today

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

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What: Shares of manufacturer Kennametal Inc. jumped as much as 10% today after it reported earnings.

So what: Sales dropped 15% to $639.0 million in the quarter and Kennametal swung to a net loss of $46.2 million, or $0.58 per share. But after pulling out one-time items, the company earned $0.46 per share, which beat estimates by $0.02.

Management also tightened its full-year guidance by $0.05 on the top and bottom end to $1.95-$2.05 per share, which is at the high end of the $1.96 Wall Street expects.

Now what: Results may have beaten expectations, but they're still down significantly from a year ago and management is having to cut costs dramatically to keep up. Even at the midpoint of management's expected earnings for 2015, shares are trading at over 19 times forward earnings, which is a lot to pay for a company that's shrinking in size. I just can't see the value in buying shares today, despite the fact that Kennametal beat Wall Street's earnings estimate for the quarter.

The article Why Kennametal Inc.'s Shares Popped 10% Today originally appeared on Fool.com.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.