What happened

Shares of paper recycling equipment-maker Kadant (NYSE:KAI) jumped more than 18% in early Wednesday trading before giving back about half its gains as the day continued. Kadant shares remained up 8.4% as of 1 p.m. EDT.

So what

Kadant beat expectations in its fiscal Q1 2017 earnings report, released after close of trading on Tuesday. The company reported earnings of $0.80 per share -- versus expectations for only $0.64 -- on sales of $102.9 million. Analysts had forecast only $99.3 million.

Kadant's earnings were up 29% year over year in Q1, despite revenue gains of only 7%. Kadant expanded its operating profit margin by 120 basis points, to 11.7%, which helped explain why profits grew so much faster than revenues. Also, Uncle Sam took a smaller tax bite out of Kadant's profits this quarter than it did one year ago, which helped Kadant further pad its bottom line.

Stick figure explains why stock chart is going up.

Image source: Getty Images.

Now what

Peering into the future, Kadant CEO Jonathan Painter predicted that "excellent operating metrics, a robust parts and consumables business, and strong bookings momentum" have positioned the company to reap anywhere from $427 million to $437 million in revenues this year, while profits are expected to range between $3.27 and $3.37 per share -- $0.14 better than previously predicted.

Granted, Kadant just finished reporting an earnings beat worth $0.16, so management's prediction of $0.14 more in profits this year appears to suggest that some of the profit Kadant planned to earn later in the year shifted forward into Q1, instead. But some is not all, and based on guidance, it still appears that 2017 will be a strong year for Kadant.

No wonder investors are applauding.

Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.