Kadant 2025 Q2 Earnings Mixed Performance as Net Income Falls 16%

Kadant reported mixed results for Q2 2025, with revenue and net income declining despite stronger bookings and cash flow. The company maintained full-year guidance and signaled optimism about the second half of the year.

Revenue
Kadant’s total revenue dropped by 7.1% year-over-year to $255.27 million for Q2 2025. This decline was driven by the Industrial Processing segment, which saw a 16.4% revenue drop to $95.94 million. In contrast, the Flow Control segment showed resilience, with a 4% increase to $95.95 million. The Material Handling segment posted a 6.4% revenue decline to $63.38 million. The shift in product mix is notable, with parts and consumables now accounting for 71% of total revenue compared to 63% in the prior year, reflecting a strategic move toward more stable, recurring income.

Earnings/Net Income
Kadant’s earnings per share (EPS) fell 16.5% to $2.22 in Q2 2025, down from $2.66 in the same period last year. Net income also decreased by 15.6% to $26.64 million, compared to $31.57 million in Q2 2024. Despite a 150-basis-point improvement in gross margin to 45.9%, the earnings decline reflects broader demand headwinds and margin pressures.

Price Action
Kadant’s stock price experienced a slight decline in recent trading activity, falling 0.34% on the latest trading day and 2.14% over the past week. The stock has also declined 0.39% month-to-date, reflecting cautious investor sentiment amid mixed earnings results.

Post-Earnings Price Action Review
The strategy of buying KAI when earnings beat and holding for 30 days proved highly effective, delivering a 193.78% return and outperforming the benchmark return of 84.41%. The approach was marked by a Sharpe ratio of 0.72 and a maximum drawdown of 0%, demonstrating strong risk-adjusted returns. While the 30-day holding period introduced some volatility (34.35% volatility rate), the strategy successfully captured the positive momentum from earnings beats.

CEO Commentary
Jeffrey L. Powell, President and CEO, expressed confidence in the company’s strategic direction despite global trade uncertainties. He highlighted strong capital order activity, stable aftermarket demand, and the successful integration of recent acquisitions. Powell emphasized Kadant’s healthy backlog and expectations of stronger project activity, particularly in fiber processing. He also noted the team’s solid execution, which led to robust gross margins, and expressed optimism for sequential growth in the second half of 2025.

Guidance
Kadant maintained its full-year 2025 guidance, forecasting revenue of $1.020 to $1.040 billion and adjusted EPS of $9.05 to $9.25. For Q3 2025, the company expects revenue between $256 and $263 million and adjusted EPS of $2.13 to $2.23. Management anticipates stronger performance in the back half of the year as demand stabilizes.

Additional News
Kadant announced strong cash flow generation in Q2, with operating cash flow increasing 44% to $40.5 million and free cash flow rising 58% to $36.5 million. The company also highlighted a 7% increase in bookings to $269.4 million, signaling renewed customer confidence in its capital equipment. Kadant's gross margin improved by 150 basis points to 45.9%, demonstrating effective cost management and pricing discipline. The company’s strategic shift toward parts and consumables now accounts for 71% of revenue, offering greater margin stability and recurring income. Additionally, Kadant is hosting a webcast on July 30, 2025, to discuss Q2 results and future outlook with investors.