Kadant 2025 Q2 Earnings Misses Targets as Net Income Falls 15.6%

Kadant (KAI) reported fiscal 2025 Q2 earnings on Aug 6, 2025. The company missed expectations as revenue and earnings declined year-over-year, while it trimmed its 2025 guidance to reflect ongoing market challenges.

Revenue
Kadant’s total revenue in Q2 2025 fell 7.1% to $255.27 million, compared to $274.76 million in the prior-year period. The decline was broad-based across its business segments. The Flow Control segment reported revenue of $95.95 million, Industrial Processing generated $95.94 million, and Material Handling recorded $63.38 million. Together, these segments accounted for the company’s total revenue of $255.27 million. The results reflect a challenging market environment and ongoing headwinds affecting capital equipment demand.

Earnings/Net Income
Kadant’s earnings took a hit, with net income falling to $26.64 million, a 15.6% drop from $31.57 million in Q2 2024. Similarly, EPS declined 16.5% to $2.22 compared to $2.66 in the prior year, indicating a disappointing performance in profitability.

Price Action
Kadant’s stock price showed mixed performance: it edged up 0.28% during the latest trading day, but declined 9.70% over the past week, while rising 1.80% month-to-date.

Post-Earnings Price Action Review
A strategy of buying KAI when earnings beat and holding for 30 days historically delivered a 193.78% return, significantly outperforming the benchmark return of 84.41%. This strategy's excess return was 109.37%, with a CAGR of 24.64%, suggesting strong growth potential. However, it also experienced a maximum drawdown of 34.35%, highlighting the considerable risk involved.

CEO Commentary
Jeffrey L. Powell, President and CEO, highlighted strong cash flow and improved capital equipment bookings in Q2 2025, noting customer preference for Kadant technologies amid evolving trade policies. He emphasized a healthy backlog and anticipated stronger second-half bookings, driven by stable demand for aftermarket parts and ongoing capital project activity. The CEO struck a cautiously optimistic tone, underscoring Kadant’s strategic positioning in sustainable industrial processing and confidence in maintaining full-year revenue and adjusted EPS guidance.

Guidance
Kadant revised its 2025 GAAP EPS guidance to $8.89 to $9.09, down from $8.97 to $9.17, while maintaining revenue expectations of $1.020 to $1.040 billion. For Q3, the company expects revenue of $256 to $263 million and GAAP EPS of $2.12 to $2.22, with adjusted EPS of $2.13 to $2.23 after excluding $0.01 of acquisition-related costs. Full-year adjusted EPS guidance remains at $9.05 to $9.25, excluding $0.16 of acquisition costs.

Additional News
Kadant’s Q1 2025 earnings highlighted a mixed performance amid market challenges, with bookings up 3% to $256 million and revenue down 4% to $239 million. Gross margin improved to 46.1%, and free cash flow grew 15% to $19 million. However, net income declined 3% to $24 million, and adjusted EPS fell 12% to $2.10. The company revised its 2025 guidance downward, citing geopolitical uncertainties and tariff impacts, with new revenue guidance set at $1.02 to $1.04 billion and adjusted EPS guidance reduced to $9.05 to $9.25. Management attributed the decline in outlook to $5–6 million in incremental tariff costs and delayed capital projects due to economic uncertainty. Despite these challenges, Kadant demonstrated operational resilience, particularly in its strong margin expansion and free cash flow generation.