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1. Company Snapshot

1.a. Company Description

Kennametal Inc.engages in development and application of tungsten carbides, ceramics, and super-hard materials and solutions for use in metal cutting and extreme wear applications to enable customers work against corrosion and high temperatures conditions worldwide.The company operates through two segments, Metal Cutting and Infrastructure.


It offers standard and custom products, including turning, milling, hole making, tooling systems, and services, as well as specialized wear components and metallurgical powders for manufacturers engaged in various industries, such as the manufacturers of transportation vehicles and components, machine tools, and light and heavy machinery; airframe and aerospace components; and energy-related components for the oil and gas industry, as well as power generation.The company also provides specified product design, selection, application, and support services; and standard and custom metal cutting solutions to aerospace, general engineering, energy, and transportation customers.In addition, it produces compacts, nozzles, frac seats, and custom components used in oil and gas, and petrochemical industries; rod blanks and abrasive water jet nozzles for general industries; earth cutting tools and systems used in underground mining, trenching and foundation drilling, and road milling; tungsten carbide powders for the oil and gas, aerospace, and process industries; and ceramics used by the packaging industry for metallization of films and papers.


It provides its products under the Kennametal, WIDIA, WIDIA Hanita, and WIDIA GTD brands through its direct sales force; a network of independent and national distributors; integrated supplier channels; and through the Internet.The company was founded in 1938 and is based in Pittsburgh, Pennsylvania.

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1.b. Last Insights on KMT

Kennametal Inc.'s recent performance was driven by strong Q1 fiscal 2026 results, with sales increasing 3% to $498 million and adjusted EPS rising 18% to $0.34. The company's operating income grew 11% to $41 million, and it returned $25 million to shareholders through share repurchases and dividends. Kennametal's guidance for fiscal 2026 was also raised, citing share gains and modest end-market improvements. Analysts have boosted their forecasts, with earnings estimates revised upward. The company's strategy to cut costs, including plant closures, is expected to yield significant savings. (Source: PRNewswire, Zacks Consensus Estimate)

1.c. Company Highlights

2. Kennametal's Fiscal '25 Earnings: A Mixed Bag

Kennametal reported a mixed financial performance for its fiscal year 2025, with sales declining 4% organically and adjusted EPS coming in at $1.34. The company's fourth-quarter results reflected continued market softness, with sales decreasing 5% organically and adjusted EPS declining to $0.34, missing estimates of $0.4. The adjusted EBITDA margin was 14.8%, and the company realized $6 million in savings from its restructuring program. Cash flow from operating activities was $208 million, and the company returned $122 million to shareholders through share repurchases and dividends.

Publication Date: Aug -23

📋 Highlights
  • Structural Cost Savings Target: $90 million in annualized savings by FY26, up from $35 million currently.
  • Organic Sales Decline: FY25 sales dropped 4% organically; Q4 sales fell 5% organically due to market softness.
  • Shareholder Returns: $122 million returned via buybacks and dividends in FY25.
  • FY26 Sales Outlook: Guidance of $1.95B–$2.05B, with volume expected to decline -5% to flat.
  • Adjusted EPS Guidance: $0.90–$1.30 for FY26, reflecting margin pressures and expected tungsten cost pass-through.

Segment Performance and Outlook

Kennametal's Aerospace & Defense segment is expected to drive growth in fiscal '26, with low double-digit growth projected. In contrast, the Transportation segment is expected to decline mid-single-digit, while Energy is expected to be flat. The company's guidance for fiscal '26 expects sales to be between $1.95 billion and $2.05 billion, with adjusted EPS in the range of $0.90 to $1.30. As Sanjay K. Chowbey, CEO, noted, "We secured key wins in Aerospace & Defense and Power Generation, and we're positioned well for long-term growth."

Valuation and Metrics

With a P/E Ratio of 17.7, P/B Ratio of 1.28, and EV/EBITDA of 7.16, Kennametal's valuation metrics suggest that the market is pricing in some level of growth. The company's Dividend Yield of 3.7% and Free Cash Flow Yield of 7.26% are also attractive. However, the Net Debt / EBITDA ratio of 1.56 indicates that the company still has some debt to contend with. ROE and ROIC are at 7.42% and 5.04%, respectively, indicating a relatively stable return profile.

Restructuring Efforts and Cost Optimization

Kennametal is focused on structural cost reductions and portfolio optimization to address margin pressures. The company has increased its restructuring program to achieve $90 million in annualized savings by the end of fiscal '26. Two additional facilities will be consolidated by the end of fiscal '28, exceeding the previous target of 3 to 5 consolidations. The company is also reviewing its product and business mix to improve performance and may exit certain low-performing businesses.

Outlook and Conclusion

Analysts are estimating revenue growth of 0.6% for the next year, which is relatively modest. Kennametal's guidance for fiscal '26 suggests that the company is expecting a gradual improvement in its financial performance, driven by growth in Aerospace & Defense and cost optimization efforts. The company's commitment to returning value to shareholders through dividends and share repurchases is also a positive.

3. NewsRoom

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Kennametal (KMT) Just Flashed Golden Cross Signal: Do You Buy?

Nov -10

Source: zacks.com

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Kennametal Analysts Boost Their Forecasts After Better-Than-Expected Q1 Results

Nov -07

Source: benzinga.com

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Can Kennametal (KMT) Run Higher on Rising Earnings Estimates?

Nov -07

Source: zacks.com

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Kennametal's Q1 Earnings & Revenues Top Estimates, Increase Y/Y

Nov -06

Source: zacks.com

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Kennametal Inc. (KMT) Q1 2026 Earnings Call Transcript

Nov -05

Source: seekingalpha.com

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Kennametal (KMT) Reports Q1 Earnings: What Key Metrics Have to Say

Nov -05

Source: zacks.com

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Kennametal (KMT) Q1 Earnings and Revenues Surpass Estimates

Nov -05

Source: zacks.com

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Kennametal Announces Fiscal 2026 First Quarter Results

Nov -05

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.00%)

6. Segments

Metal Cutting

Expected Growth: 3.0%

Kennametal's Metal Cutting segment growth is driven by increasing demand for high-performance cutting tools in aerospace, energy, and automotive industries. Additionally, the company's investments in digitalization, innovation, and customer service have improved operational efficiency and enhanced customer experience, contributing to the 3.0% growth.

Infrastructure

Expected Growth: 3.0%

Kennametal Inc.'s Infrastructure segment growth of 3.0% is driven by increasing demand for road construction and maintenance, growth in energy infrastructure projects, and rising adoption of advanced materials and technologies. Additionally, the company's strategic acquisitions and expansion into emerging markets are contributing to the segment's growth.

7. Detailed Products

Widia Metal Cutting Tools

Widia metal cutting tools are designed for high-performance machining in a variety of industries, including aerospace, automotive, and general engineering.

Kennametal Tooling Systems

Kennametal tooling systems provide a comprehensive range of tooling solutions for turning, milling, and holemaking operations.

Widia Holemaking and Drilling Tools

Widia holemaking and drilling tools offer high-performance drilling and holemaking solutions for a range of industries.

Kennametal Indexable Inserts

Kennametal indexable inserts provide a cost-effective and efficient solution for machining operations.

Widia Solid Carbide Drills

Widia solid carbide drills offer high-performance drilling solutions for a range of industries.

Kennametal Tungsten Carbide Grades

Kennametal tungsten carbide grades provide a range of wear-resistant materials for demanding applications.

8. Kennametal Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Kennametal Inc. faces moderate threat from substitutes due to the availability of alternative cutting tools and machining solutions from competitors.

Bargaining Power Of Customers

Kennametal Inc. has a diverse customer base, which reduces the bargaining power of individual customers, giving the company an upper hand in negotiations.

Bargaining Power Of Suppliers

Kennametal Inc. relies on a network of suppliers for raw materials and components, but the company's scale and global presence give it some bargaining power in negotiations.

Threat Of New Entrants

The cutting tool and machining solutions industry has high barriers to entry, including significant capital investments and technological expertise, which deters new entrants and reduces the threat of new competition.

Intensity Of Rivalry

The cutting tool and machining solutions industry is highly competitive, with several established players competing for market share, which increases the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 31.84%
Debt Cost 6.19%
Equity Weight 68.16%
Equity Cost 12.76%
WACC 10.67%
Leverage 46.72%

11. Quality Control: Kennametal Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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A-Score: 6.4/10

Value: 5.6

Growth: 3.0

Quality: 7.4

Yield: 5.0

Momentum: 9.5

Volatility: 7.7

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A-Score: 5.5/10

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Quality: 4.5

Yield: 7.0

Momentum: 8.0

Volatility: 2.0

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Kennametal

A-Score: 5.0/10

Value: 6.3

Growth: 4.2

Quality: 4.9

Yield: 6.0

Momentum: 2.5

Volatility: 6.0

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Value: 8.4

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Quality: 4.8

Yield: 4.0

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Volatility: 5.0

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Starrett

A-Score: 4.7/10

Value: 8.4

Growth: 6.9

Quality: 6.8

Yield: 0.0

Momentum: 5.0

Volatility: 1.3

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Hillman Solutions

A-Score: 3.5/10

Value: 3.4

Growth: 5.4

Quality: 3.9

Yield: 0.0

Momentum: 3.5

Volatility: 5.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

27.78$

Current Price

27.78$

Potential

-0.00%

Expected Cash-Flows