Post Earnings Coverage as KLX Quarterly Revenue Climbed 6.6%; Returns to Profit Compared to a Year Ago

Upcoming AWS Coverage on Embraer Post-Earnings Results

LONDON, UK / ACCESSWIRE / March 21, 2017 / Active Wall St. announces its post-earnings coverage on KLX Inc. (NASDAQ: KLXI). The Company posted its financial results for the fourth quarter fiscal 2016 (Q4 FY16) and full year 2016 (FY16) on March 06, 2017. The distributor and value added service provider of aerospace fasteners and consumables outperformed earnings expectation. Register with us now for your free membership at:

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One of KLX Inc.’s competitors within the Aerospace/Defense Products & Services space, Embraer S.A. (NYSE: ERJ), reported on March 09, 2017, its fourth quarter and fiscal year 2016 results and 2017 outlook. AWS will be initiating a research report on Embraer in the coming days.

Today, AWS is promoting its earnings coverage on KLXI; touching on ERJ. Get our free coverage by signing up to:

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Earnings Reviewed

In Q4 FY16, KLX reported net revenue of $382.0 million which increased 6.6% compared to $358.2 million for the same period in the prior year, driven by revenue increase in its Aerospace Solutions Group. The Company’s reported numbers lagged behind analysts’ consensus of $393 million.

KLX reported in Q4 FY16, net earnings of $19.0 million, or $0.36 per diluted share, compared to a net loss of $10.3 million, or $0.20 per diluted share, which improved $29.3 million, or $0.56 million per diluted share, on a y-o-y basis. The Company’s adjusted net earnings were $27.6 million, or $0.53 per diluted share, compared to loss of $4.6 million, or 0.09 per diluted share, in the year ago same period, and improved $32.2 million and $0.62 per diluted share from the prior year’s comparable period. The Company’s results surpassed Wall Street’s expectations for earnings of $0.27 per share.

In FY16, KLX reported net revenue of $1.53 billion, down 2.3% compared to $1.57 billion in the year ago corresponding period. Furthermore, the Company’s net loss was $54.6 million, or $1.05 per diluted share, in FY16 compared to net loss of $385.8 million, or $7.39 per diluted share, in FY15.

Segment Performance

During Q4 FY16, KLX’s Aerospace Solutions Group’s net sales were of $338.4 million, up by 10.6% compared to $306.1 million in Q4 FY15. The segment’s reported operating earnings improved 26% to $55.3 million compared to $43.9 million in Q4 FY15. Aerospace Solutions Group’s operating margin was 16.3%. The reported quarter operating results include approximately $1 million of Herndon integration related costs and expenses.

During FY16, Aerospace Solutions Group’s segment revenues were $1.38 billion up 4.9% on a y-o-y basis, driven principally by the contribution of Herndon’s military aftermarket business and increased aircraft maintenance activity, while operating earnings were up 8.8% to $230.2 million.

KLX’s Energy Services Group’s net sales were down 16.3% to $43.6 million in Q4 FY16 compared to $52.1 million in Q4 FY15. The segment’s operating loss declined 54.9% to $18.8 million compared to $41.7 million in Q4 FY15. In Q4 FY16, cash burn rate (EBITDA before non-cash compensation expense less capital expenditures) improved by $38.2 million, or 78.3%, to $10.6 million compared with Q4 FY15, reflecting the significant cost reductions implemented during the past year, together with the nascent turnaround in the oilfield services sector.

For the year ended January 31, 2016, Energy Services Group’s revenues were $153.2 million, a decrease of $101.7 million, or 39.9%, compared to $254.9 in the prior year, while operating loss widened by 15.9% to $91.0 million. The improvement in operating results reflects the intensive effort to consolidate facilities and align headcount with demand.

Liquidity

For the year ended January 31, 2017, KLX generated free cash flow of $115.4 million, or approximately 211% of net earnings and approximately 112% of adjusted net earnings. As of January 31, 2017, cash on hand was approximately $277 million. Total long-term debt was $1.2 billion less cash, resulting in net debt of approximately $923 million, and the Company’s net debt to net capital ratio was approximately 29%. There were no borrowings outstanding under the Company’s $750.0 million credit facility. During the reported quarter, KLX repurchased approximately $30 million of its common shares. Total share repurchases for FY16 were approximately $40.5 million at an average price of $41.20 per share.

In a separate press release on March 13, 2017, KLX announced that its Board of Directors has sanctioned an increase in the Company’s share repurchase authorization from $100 million to $200 million. Up to the date of the announcement, KLX has repurchased approximately $60 million of shares under the original authorization.

Outlook

For FY17, KLX expects net revenues to increase approximately 10% and operating earnings to grow approximately 45%. The Company’s adjusted net earnings are expected to increase approximately 40%, while free cash flow conversion ratio is expected to be 230% of net earnings and 125% of adjusted net earnings. KLX’s Aerospace Solutions Group’s revenue is forecasted to increase by a mid-single digit percentage, reflecting slower growth in the first half of the year, followed by acceleration in growth in the second half of the year. Furthermore, KLX’s Energy Services Group’s revenues are expected to increase by 30% for FY17.

Stock Performance

At the close of trading session on Monday, March 20, 2017, KLX Inc.’s share price finished the trading session at $45.90, declining 1.18%. A total volume of 282.56 thousand shares exchanged hands. The stock has surged 38.88% and 40.84% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the Company have gained 1.75%. The company’s shares have a PE ratio of 43.88.

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