Kadant ((KAI)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Kadant’s recent earnings call painted a mixed picture of the company’s financial health and future prospects. While the company celebrated strong performance in the aftermarket parts segment and robust cash flow generation, it also acknowledged challenges such as revenue declines in key segments, increased expenses, and ongoing uncertainty in capital project orders. Despite these hurdles, Kadant expressed optimism about future capital demand and market improvements, although the overall outlook remains tempered by existing challenges.
Record Aftermarket Parts Revenue
Kadant achieved a milestone in its aftermarket parts segment, reporting record revenue in Q3 2025. The segment saw a 6% increase compared to the same quarter last year, significantly bolstering the company’s earnings performance. This growth underscores the strength of Kadant’s aftermarket business, which continues to be a critical revenue driver.
Material Handling Segment Growth
The Material Handling segment emerged as a standout performer, with revenue climbing 11% to a record $70 million. This growth was fueled by an 18% increase in capital shipments compared to the previous year, highlighting the segment’s robust demand and operational efficiency.
Strong Cash Flow
Kadant reported impressive cash flow figures for Q3 2025, with cash flow from operations and free cash flow reaching $47 million and $44 million, respectively. These figures reflect the company’s strong operational performance and its ability to generate substantial cash flow even amid challenging market conditions.
Gross Margin Improvement
The company managed to improve its gross margin by 50 basis points, reaching 45.2% in Q3 2025. This improvement demonstrates Kadant’s resilience against cost pressures and its effective cost management strategies.
Decline in Industrial Processing Segment Revenue
Despite successes in other areas, Kadant faced a 4% revenue decline in its Industrial Processing segment, with revenue dropping to $106 million. This decrease was primarily attributed to reduced capital shipments, reflecting broader market challenges.
Flow Control Segment Revenue Decline
The Flow Control segment also experienced a downturn, with a 3% decline in revenue compared to the previous year. This was similarly due to reduced capital shipments, indicating ongoing challenges in this segment.
Decreased EPS
Kadant reported a decrease in earnings per share, with GAAP EPS falling 12% to $2.35 and adjusted EPS decreasing 9% to $2.59 in Q3 2025. This decline from a record $2.84 in Q3 2024 highlights the financial pressures the company is currently facing.
SG&A Expenses Increase
The company saw an increase in SG&A expenses as a percentage of revenue, rising to 27.9% in Q3 2025 from 25.4% in the prior year. This increase reflects higher operational costs, which have impacted the company’s profitability.
Challenges with Capital Project Orders
Kadant continues to face challenges with capital project orders, with bookings remaining flat compared to the same period last year. This sustained weakness impacts future revenue expectations and reflects broader economic uncertainties.
Forward-Looking Guidance
Looking ahead, Kadant provided guidance that reflects both optimism and caution. The company anticipates strong aftermarket demand and improving business activity in Q4 2025. Revenue guidance for the full year has been adjusted to $1.36 billion-$1.46 billion, with adjusted EPS guidance remaining at $9.05-$9.25. This outlook factors in recent acquisitions but excludes certain costs, indicating a strategic approach to navigating current market conditions.
In summary, Kadant’s earnings call revealed a company navigating through mixed financial waters. While strong aftermarket parts performance and cash flow generation are positive highlights, challenges such as revenue declines in key segments and increased expenses temper the overall outlook. The company’s forward-looking guidance suggests cautious optimism as it anticipates stronger demand and improved business activity in the coming quarters.