Kennametal Inc. (KMT) | Investment Case

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

Last Price	27.85
Change Percentage	-0.29%
Open	27.82
Previous Close	27.93
Market Cap ( Millions)	2117
Volume	351049
Year High	28.43
Year Low	17.3
M A 50	24.0
M A 200	22.28

FCF Yield	4.39%
Dividend Yield	2.87%
ROE	7.45%
Debt / Equity	45.14%
Net Debt / EBIDTA	190.53%
Price To Book	1.6
Price Earnings Ratio	22.48
Price To FCF	22.8
Price To sales	1.07
EV / EBITDA	10.06

2. Kennametal's Q1 FY2026 Earnings Exceed Expectations

Kennametal reported a strong first quarter fiscal 2026, with sales increasing 3% organically year-over-year, marking the company's first quarter of organic growth in 2 years. Adjusted EPS was $0.34, up from $0.29 in the prior year quarter, beating analyst estimates of $0.24. The company's adjusted EBITDA margin was 15.3%, up from 14.3% in the prior year quarter, driven by price and tariff surcharges and restructuring savings.

Publication Date: Nov -29

                                    📋 Highlights
                                    Exceeded Guidance:
                                                Kennametal reported 3% organic sales growth (first in 2 years) and adjusted EPS of $0.34 vs. $0.29 prior year.
Raised Full-Year Outlook:
                                                Sales guidance lifted to $2.1–$2.17 billion and adjusted EPS to $1.35–$1.65.
EBITDA Margin Expansion:
                                                Adjusted EBITDA margin rose to 15.3% from 14.3%, driven by surcharges and $35M restructuring savings.
Shareholder Returns:
                                                Returned $25 million via buybacks and dividends, despite negative $5M free cash flow year-to-date.
Power Generation Growth:
                                                Identified $250M TAM with 10% CAGR potential, fueled by demand for large engines and energy solutions.

                                

End Market Trends

End market trends show Aerospace and Defense improving due to increased build rates and easing supply chain pressures, while Transportation slightly improved with a low single-digit negative growth outlook. The company secured project wins in infrastructure, metal cutting, and energy, particularly in Power Generation, driven by rising demand for renewable and traditional energy sources.

Segment Performance

In Power Generation, a $250 million Total Addressable Market (TAM) was identified, driven by growth in large engines, with a 10% Compound Annual Growth Rate (CAGR) expected over the next few years. The Energy end market outlook improved to mid-single digits from flat, driven by price increases and surcharges, despite rig counts remaining down. The company's commercial teams have been aggressive in raising prices to cover costs, with the ability to pass through costs credited to their efforts.

Guidance and Outlook

The company raised its sales and EPS outlook for fiscal '26, expecting sales between $2.1 billion and $2.17 billion and adjusted EPS between $1.35 and $1.65. EPS guidance was increased by $0.40, driven by volume and price, with a tax benefit of around $0.03. The company expects price/raw favorability to be a tailwind in the year, but anticipates neutrality in Q4 and potentially a headwind if tungsten prices remain high.

Valuation

With a P/E Ratio of 22.35 and an EV/EBITDA of 10.01, Kennametal's valuation metrics indicate a relatively stable outlook. The company's ROE of 7.45% and ROIC of 5.07% demonstrate a decent return on equity and invested capital. Analysts estimate next year's revenue growth at 6.0%, which is slightly higher than the current year's growth rate. The Dividend Yield of 2.89% provides a relatively stable income stream for investors.

3. NewsRoom

Best Momentum Stocks to Buy for Dec.3

Dec -03

Source: zacks.com

Kennametal Recognized by Newsweek as One of America's Most Responsible Companies

Dec -03

Source: prnewswire.com

KMT, UHS, and More Are Now Strong Buy Stocks (Dec. 3)

Dec -03

Source: zacks.com

Best Income Stocks to Buy for Dec. 3

Dec -03

Source: zacks.com

Handelsbanken Fonder AB Invests $201,000 in Kennametal Inc. $KMT

Dec -01

Source: defenseworld.net

Best Momentum Stocks to Buy for Nov. 28

Nov -28

Source: zacks.com

Best Income Stocks to Buy for Nov. 28

Nov -28

Source: zacks.com

Connor Clark & Lunn Investment Management Ltd. Purchases New Position in Kennametal Inc. $KMT

Nov -21

Source: defenseworld.net

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

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

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

National Presto

A-Score: 6.4/10

Value: 5.6

Growth: 3.0

Quality: 7.4

Yield: 5.0

Momentum: 9.5

Volatility: 7.7

1-Year Total Return ->

Steelcase

A-Score: 5.5/10

Value: 6.9

Growth: 4.6

Quality: 4.5

Yield: 7.0

Momentum: 8.0

Volatility: 2.0

1-Year Total Return ->

Kennametal

A-Score: 5.0/10

Value: 6.3

Growth: 4.2

Quality: 4.9

Yield: 6.0

Momentum: 2.5

Volatility: 6.0

1-Year Total Return ->

Eastern

A-Score: 4.9/10

Value: 8.4

Growth: 5.4

Quality: 4.8

Yield: 4.0

Momentum: 1.5

Volatility: 5.0

1-Year Total Return ->

Starrett

A-Score: 4.7/10

Value: 8.4

Growth: 6.9

Quality: 6.8

Yield: 0.0

Momentum: 5.0

Volatility: 1.3

1-Year Total Return ->

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

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

10.69%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

10.67%

Kennametal Inc. - US4891701009

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on KMT

1.c. Company Highlights

Higher Yield

Average Growth

Medium Volatility

Earnings Miss

Stable Momentum

Earnings Beats

Revenues Beats

Lower Growth

Fairly Valued

Revenues Miss

Average Quality

2. Kennametal's Q1 FY2026 Earnings Exceed Expectations

End Market Trends

Segment Performance

Guidance and Outlook

Valuation

3. NewsRoom

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%

Infrastructure

Expected Growth: 3.0%

7. Detailed Products

Widia Metal Cutting Tools

Kennametal Tooling Systems

Widia Holemaking and Drilling Tools

Kennametal Indexable Inserts

Widia Solid Carbide Drills

Kennametal Tungsten Carbide Grades

8. Kennametal Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

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

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

27.85$

Current Price

27.85$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA