Core Viewpoint - Kennametal Inc. (KMT) has underperformed in operational performance, facing challenges from weak business segments and high debt levels [1] Group 1: Business Performance - The Metal Cutting segment has experienced a 4% year-over-year decline in organic revenues in Q4 of fiscal 2025, primarily due to decreased demand in the transportation end market and lower industrial production [3] - The Infrastructure segment's organic revenues fell by 5% year-over-year in Q4 of fiscal 2025, attributed to weakness in the general engineering end market and reduced mining activity in the Americas and Asia Pacific [4] Group 2: Financial Health - As of the end of Q4 fiscal 2025, Kennametal's long-term debt was $596.8 million, with cash and cash equivalents amounting to $140.5 million, resulting in a long-term debt-to-capital ratio of 31.1% [5] - The company's high debt levels may increase financial obligations and negatively impact profitability in the future [5] Group 3: Market Performance - Over the past year, Kennametal's stock has declined by 16.3%, contrasting with the industry's growth of 4.4% [7] - The earnings per share (EPS) estimate for fiscal 2026 has decreased from $1.38 to $1.22 over the past 60 days, indicating a downward trend in earnings expectations [9][11] Group 4: External Factors - Kennametal's global operations expose it to risks from geopolitical issues and adverse foreign currency movements, with a 1% negative impact on revenues due to foreign currency translation in fiscal 2025 [10]

Core Insights - Kennametal Inc. (KMT) reported adjusted earnings of 34 cents per share for Q4 fiscal 2025, missing the Zacks Consensus Estimate of 40 cents, and reflecting a 30.6% decrease from the previous year [1][9] - The company's adjusted earnings for fiscal 2025 were $1.34 per share, down 10.7% year over year [1] Revenue Details - KMT's revenues for Q4 were $516 million, a 5% decline from the same quarter last year, and below the Zacks Consensus Estimate of $527 million [2][9] - For fiscal 2025, net revenues totaled $1.97 billion, down 4% year over year [2] Geographical Performance - Revenues from American operations decreased 5% year over year to $254.3 million [3] - Sales from Europe, the Middle East, and Africa were $158.4 million, also down 5% from the previous year [3] - Asia Pacific sales decreased 2% to $103.8 million [3] Segment Performance - The Metal Cutting segment reported revenues of $321 million, a 4% decline year over year, missing the consensus estimate of $323 million [3] - The Infrastructure segment's revenues totaled $196 million, down 6% year over year, with organic revenues decreasing 5% [4] Margin Profile - KMT's cost of goods sold decreased 0.3% year over year to $370.8 million, while gross profit declined 15% to $145.7 million, leading to a gross margin decrease of 300 basis points to 28.2% [5][9] - Operating income fell 48.9% year over year to $31.4 million, with an operating margin decline of 520 basis points to 6.1% [6] Balance Sheet and Cash Flow - As of the end of Q4, cash and cash equivalents were $140.5 million, up from $128 million in the previous year [7] - Long-term debt increased slightly to $596.8 million from $596 million year over year [7] - KMT generated net cash of $208.3 million from operating activities, down from $277.1 million in the previous fiscal year [8] Dividend and Guidance - The board approved a quarterly cash dividend of 20 cents per share, payable on August 26, 2025 [11] - For fiscal 2026, KMT anticipates sales between $1.95 billion and $2.05 billion, with adjusted earnings per share expected to range from 90 cents to $1.30 [12]

Core Viewpoint - The article emphasizes the importance of value investing and highlights Kennametal (KMT) as a strong value stock based on various financial metrics [1][7]. Company Overview - Kennametal (KMT) currently holds a Zacks Rank of 2 (Buy) and an A for Value, indicating strong potential for investors [3]. - The stock is trading at a P/E ratio of 17.65, which is lower than the industry average of 18.35 [3]. Valuation Metrics - KMT's P/B ratio is 1.5, significantly lower than the industry average of 2.58, suggesting a solid valuation compared to its book value [4]. - The P/S ratio for KMT is 0.8, compared to the industry's average of 1.48, indicating that the stock is undervalued based on sales [5]. - KMT has a P/CF ratio of 7.96, which is much lower than the industry average of 17.43, further supporting the notion that KMT is undervalued based on cash flow [6]. Investment Outlook - The combination of KMT's strong earnings outlook and favorable valuation metrics positions it as an impressive value stock at the moment [7].

Group 1 - Kennametal (KMT) has experienced a significant decline of 15.3% over the past four weeks, but it is now in oversold territory, indicating a potential for a trend reversal [1] - The Relative Strength Index (RSI) for KMT is currently at 28.83, suggesting that the heavy selling pressure may be exhausting, which could lead to a price rebound [5] - There is a strong consensus among Wall Street analysts that KMT will report better earnings than previously predicted, with a 1.8% increase in the consensus EPS estimate over the last 30 days [7] Group 2 - KMT holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, indicating a strong potential for a turnaround [8]

Financial Data and Key Metrics Changes - Sales for the fourth quarter decreased 5% year over year, with Metal Cutting declining 4% and Infrastructure declining 5% [16][21] - Adjusted EPS declined to $0.34 compared to $0.49 in the prior year quarter [20] - Adjusted EBITDA margin was 14.8%, down from 17.7% in the prior year quarter [18] - Cash flow from operating activities for the year was $208 million, with a full year free operating cash flow of $121 million compared to $175 million in the prior year [12][25] Business Line Data and Key Metrics Changes - Metal Cutting reported an organic sales decline of 4% year over year, with adjusted operating margin decreasing to 7.9% [21][23] - Infrastructure organic sales decreased by 5% year over year, with adjusted operating margin declining to 6.8% [23][25] - Aerospace and Defense grew 1% year over year, while Transportation declined 4% and General Engineering declined 5% [22][24] Market Data and Key Metrics Changes - Most end markets experienced mid single-digit declines on a constant currency basis, with Energy declining 6% due to lower activity [11][22] - Aerospace and Defense is expected to see low double-digit growth, while Transportation is projected to decline mid-single digits [13][14] Company Strategy and Development Direction - The company is focusing on rightsizing capacity and optimizing its cost structure to address structural cost issues [34][36] - Plans include consolidating operations and maximizing efficiency across all locations, with a target of $125 million in cost savings by 2027 [36][38] - The company aims to maintain flexibility for future recovery while addressing current low volumes [37] Management's Comments on Operating Environment and Future Outlook - Management acknowledged continued market softness and uncertainty around tariffs impacting global production [10][11] - The outlook for fiscal 2026 includes expected sales between $1.95 billion and $2.05 billion, with volume ranging from negative 5% to flat [27] - Management expressed confidence in the long-term prospects of end markets despite near-term challenges [82] Other Important Information - The company returned $122 million to shareholders through share repurchases and dividends [12] - The company has a healthy balance sheet with $840 million of cash and revolver availability at quarter end [26] Q&A Session Summary Question: Can you provide more color on the fiscal year 2026 outlook? - Management indicated a balanced view on the outlook, projecting single-digit declines in certain segments while expecting growth in Aerospace and Defense [40][41] Question: How much of the strategy shift is due to Kennametal's positioning versus macro factors? - Management noted that both structural challenges and market conditions are influencing the strategy, with a focus on sustainable changes [42][44] Question: What is the expected seasonality of earnings for fiscal 2026? - Management expects a normal seasonal pattern with about 40% of EPS in the first half and 60% in the second half [48][51] Question: Are margins expected to improve in fiscal 2026? - Management projected operating margin improvements, although some headwinds from tariffs may compress margins [53][59] Question: How does the company plan to address competitive pressures? - Management emphasized ongoing portfolio optimization and actions to improve performance in low-performing areas [68][70] Question: What is the outlook for the energy end market? - Management expects a flat outlook for energy, with rig counts projected to decline [72] Question: What is the expectation for Aerospace and Defense growth? - Management anticipates stable low double-digit growth in Aerospace and Defense throughout the fiscal year [75]

Core Viewpoint - Momentum investing focuses on "buying high and selling higher" rather than the traditional "buying low and selling high" approach, aiming for quicker profits [1] Group 1: Momentum Investing Characteristics - Momentum investing can be risky as stocks may lose momentum if their valuations exceed future growth potential, leading to potential losses for investors [2] - A safer strategy involves investing in bargain stocks that exhibit recent price momentum, utilizing tools like the Zacks Momentum Style Score to identify such opportunities [3] Group 2: Kennametal (KMT) Stock Analysis - Kennametal (KMT) has shown a price increase of 5.3% over the past four weeks, indicating growing investor interest [4] - KMT has gained 13.4% over the past 12 weeks, with a beta of 1.44, suggesting it moves 44% more than the market [5] - KMT holds a Momentum Score of B, indicating a favorable time to invest based on momentum [6] Group 3: Earnings Estimates and Valuation - KMT has a Zacks Rank 2 (Buy) due to upward revisions in earnings estimates, which typically attract more investor interest [7] - The stock is currently trading at a Price-to-Sales ratio of 0.96, indicating it is reasonably valued at 96 cents for each dollar of sales [7] Group 4: Additional Investment Opportunities - Besides KMT, there are other stocks that meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen, suggesting further investment opportunities [8] - The Zacks Premium Screens offer over 45 different strategies to help identify potential winning stocks based on various investing styles [9]

FY25 Fourth Quarter Earnings Call Presentation August 6, 2025 Q4 FY25 EARNINGS Safe Harbor Statement Certain statements in this release may be forward-looking in nature, or "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements that do not relate strictly to historical or current facts. For example, statements about Kennametal's outlook for sales, adjusted operating income, ...

Company Performance - Kennametal reported quarterly earnings of $0.34 per share, missing the Zacks Consensus Estimate of $0.40 per share, and down from $0.49 per share a year ago, representing an earnings surprise of -15.00% [1] - The company posted revenues of $516.45 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 1.95%, and down from $543.31 million year-over-year [2] - Over the last four quarters, Kennametal has surpassed consensus EPS estimates two times and topped consensus revenue estimates just once [2] Future Outlook - The sustainability of Kennametal's stock price movement will depend on management's commentary during the earnings call and the company's earnings outlook [3][4] - The current consensus EPS estimate for the coming quarter is $0.29 on revenues of $483.36 million, and for the current fiscal year, it is $1.41 on revenues of $2 billion [7] - The estimate revisions trend for Kennametal was favorable ahead of the earnings release, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Manufacturing - Tools & Related Products industry, to which Kennametal belongs, is currently in the top 22% of over 250 Zacks industries, suggesting a positive outlook for the sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Kennametal's performance [5]

[Earnings Release Summary](index=1&type=section&id=Earnings%20Release%20Summary) [Overall Performance](index=1&type=section&id=Overall%20Performance) Kennametal's Q4 and full-year FY2025 financial performance declined, with adjusted EPS and sales decreasing Q4 & FY2025 Earnings Per Share (EPS) Summary | Period | Reported EPS | Adjusted EPS | Prior Year Reported EPS | Prior Year Adjusted EPS | | :--- | :--- | :--- | :--- | :--- | | **Q4 2025** | $0.28 | $0.34 | $0.47 | $0.49 | | **FY 2025** | $1.20 | $1.34 | $1.37 | $1.50 | Q4 & FY2025 Sales Performance | Period | Sales | Change vs Prior Year | Organic Sales Change | | :--- | :--- | :--- | :--- | | **Q4 2025** | $516 million | -5% | -5% | | **FY 2025** | $1,967 million | -4% | -4% | [Management Commentary](index=1&type=section&id=Management%20Commentary) Management implemented productivity and restructuring actions in FY2025, anticipating FY2026 headwinds but confident in strategic growth - The company faced significant headwinds from persistent market softness, tariff impacts, and foreign exchange weakness during the past year[3](index=3&type=chunk) - Strategic actions are focused on productivity, cost restructuring, footprint consolidation, and portfolio optimization, including the sale of the Goshen facility[3](index=3&type=chunk) - Despite expecting continued market headwinds in FY2026, the company is focused on strategic growth initiatives and has seen recent wins in the Aerospace & Defense and Energy end markets[3](index=3&type=chunk) [Fiscal 2025 Fourth Quarter Financial Performance](index=1&type=section&id=Fiscal%202025%20Fourth%20Quarter%20Financial%20Performance) Q4 FY2025 sales decreased 5% to **$516 million**, with operating income falling to **$31 million** due to lower volumes and costs Q4 FY2025 Operating Performance | Metric | Q4 FY2025 | Q4 FY2024 | | :--- | :--- | :--- | | **Sales** | $516 million | $543 million | | **Operating Income** | $31 million | $61 million | | **Operating Margin** | 6.1% | 11.3% | | **Adjusted Operating Income** | $38 million | $63 million | | **Adjusted Operating Margin** | 7.4% | 11.5% | - Operating income was negatively impacted by lower sales volumes, higher raw material and wage costs, a net increase in tariffs of approximately **$4 million**, and higher restructuring charges of about **$4 million**[8](index=8&type=chunk) - The company completed the sale of its Goshen, IN subsidiary, receiving **$19 million** in proceeds and recognizing a loss on divestiture of approximately **$2 million**[7](index=7&type=chunk) - Restructuring actions delivered annualized run-rate pre-tax savings of approximately **$28 million**, with total expected savings from these actions increased to **$35 million**[6](index=6&type=chunk) [Fiscal 2025 Full Year Financial Performance](index=2&type=section&id=Fiscal%202025%20Full%20Year%20Financial%20Performance) Full-year FY2025 sales decreased 4% to **$1,967 million**, with operating income and cash flow declining due to lower volumes FY2025 Operating Performance | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | **Sales** | $1,967 million | $2,047 million | | **Operating Income** | $143 million | $170 million | | **Operating Margin** | 7.3% | 8.3% | | **Adjusted Operating Income** | $158 million | $183 million | | **Adjusted Operating Margin** | 8.0% | 8.9% | FY2025 Cash Flow Summary | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | **Net Cash Flow from Operating Activities** | $208 million | $277 million | | **Free Operating Cash Flow (FOCF)** | $121 million | $175 million | - The company has achieved approximately **$65 million** in annualized run-rate pre-tax savings as of June 30, 2025, and has increased its total cost savings target from **$100 million** to **$125 million** by the end of fiscal 2027[19](index=19&type=chunk) [Business Segment Performance](index=3&type=section&id=Business%20Segment%20Performance) Both Metal Cutting and Infrastructure segments experienced Q4 FY2025 sales and operating margin declines Q4 FY2025 Metal Cutting Segment Results | Metric | Q4 FY2025 | Q4 FY2024 | | :--- | :--- | :--- | | **Sales** | $321 million | $335 million | | **Sales Change** | -4% | N/A | | **Operating Income** | $21 million | $44 million | | **Operating Margin** | 6.6% | 13.2% | Q4 FY2025 Infrastructure Segment Results | Metric | Q4 FY2025 | Q4 FY2024 | | :--- | :--- | :--- | | **Sales** | $196 million | $209 million | | **Sales Change** | -6% | N/A | | **Operating Income** | $11 million | $18 million | | **Operating Margin** | 5.5% | 8.5% | [Fiscal 2026 Outlook](index=3&type=section&id=Fiscal%202026%20Outlook) Kennametal projects FY2026 sales between **$1.95 billion** and **$2.05 billion**, with adjusted EPS from **$0.90** to **$1.30** Q1 Fiscal 2026 Outlook | Metric | Guidance | | :--- | :--- | | **Sales** | $465 - $485 million | | **Adjusted EPS** | $0.20 - $0.30 | Full Year Fiscal 2026 Outlook | Metric | Guidance | | :--- | :--- | | **Sales** | $1.95 - $2.05 billion | | **Adjusted EPS** | $0.90 - $1.30 | | **Free Operating Cash Flow** | ~120% of adjusted net income | | **Capital Spending** | ~$90 million | [Shareholder Returns](index=2&type=section&id=Shareholder%20Returns) The company returned **$122 million** to shareholders in FY2025 and declared a **$0.20** quarterly dividend - Returned a total of **$122 million** to shareholders in FY25, consisting of **$62 million** in dividends and **$60 million** in share repurchases[5](index=5&type=chunk)[18](index=18&type=chunk) - During Q4, the company repurchased **232 thousand shares** for **$5 million**; inception-to-date, **$60 million** has been spent under the **$200 million** three-year repurchase program[11](index=11&type=chunk) - The Board of Directors declared a quarterly cash dividend of **$0.20 per share**, payable on August 26, 2025[24](index=24&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) FY2025 sales decreased to **$1.97 billion**, resulting in lower gross profit and net income, with diluted EPS falling to **$1.20** FY2025 vs FY2024 Income Statement Highlights (in thousands) | Metric | Twelve Months Ended June 30, 2025 | Twelve Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Sales** | $1,966,845 | $2,046,899 | | **Gross Profit** | $598,070 | $627,093 | | **Operating Income** | $143,123 | $170,223 | | **Net Income Attributable to Kennametal** | $93,125 | $109,323 | | **Diluted EPS** | $1.20 | $1.37 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to **$2.55 billion**, with cash and inventories also rising Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $140,540 | $127,971 | | **Total current assets** | $1,039,270 | $1,002,592 | | **Total assets** | $2,545,412 | $2,503,758 | | **Total current liabilities** | $422,329 | $415,961 | | **Long-term debt** | $596,788 | $595,980 | | **Total liabilities** | $1,220,764 | $1,215,159 | | **Total Kennametal shareholders' equity** | $1,283,979 | $1,249,875 | [Condensed Consolidated Statements of Cash Flow](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flow) FY2025 net cash from operating activities decreased to **$208.3 million**, resulting in a net cash increase of **$12.6 million** Cash Flow Summary (in thousands) | Metric | Year ended June 30, 2025 | Year ended June 30, 2024 | | :--- | :--- | :--- | | **Net cash flow provided by operating activities** | $208,324 | $277,108 | | **Net cash flow used for investing activities** | $(61,825) | $(109,426) | | **Net cash flow used for financing activities** | $(133,919) | $(141,747) | | **Net increase in cash and cash equivalents** | $12,569 | $21,950 | [Segment Data](index=10&type=section&id=Segment%20Data) FY2025 Metal Cutting sales were **$1.22 billion** and Infrastructure **$747.2 million**, with all segments and regions declining FY2025 Sales & Operating Income by Segment (in thousands) | Segment | FY2025 Sales | FY2024 Sales | FY2025 Operating Income | FY2024 Operating Income | | :--- | :--- | :--- | :--- | :--- | | **Metal Cutting** | $1,219,686 | $1,280,781 | $86,375 | $132,573 | | **Infrastructure** | $747,159 | $766,118 | $58,465 | $39,857 | FY2025 Sales by Geographic Region (in thousands) | Region | FY2025 Sales | FY2024 Sales | | :--- | :--- | :--- | | **Americas** | $967,608 | $1,012,969 | | **EMEA** | $601,087 | $628,536 | | **Asia Pacific** | $398,150 | $405,394 | [Non-GAAP Reconciliations](index=11&type=section&id=Non-GAAP%20Reconciliations) [Reconciliation of Non-GAAP Measures](index=11&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) Non-GAAP measures, including adjusted EPS of **$1.34** and FOCF of **$121.2 million**, offer insights into operational performance - Management presents non-GAAP measures like adjusted operating income, adjusted EPS, and FOCF to provide useful information about the company's operational results, excluding certain items[38](index=38&type=chunk) FY2025 GAAP to Non-GAAP EPS Reconciliation | Metric | Amount | | :--- | :--- | | **Reported Diluted EPS** | $1.20 | | Restructuring and related charges | $0.13 | | Loss on divestiture | $0.01 | | **Adjusted Diluted EPS** | $1.34 | Free Operating Cash Flow (FOCF) Reconciliation (in thousands) | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | **Net cash flow from operating activities** | $208,324 | $277,108 | | Purchases of property, plant and equipment | $(88,971) | $(107,561) | | Proceeds from disposals of property, plant and equipment | $1,841 | $5,425 | | **Free operating cash flow** | $121,194 | $174,972 |

Core Viewpoint - Kennametal (KMT) has received an upgrade to a Zacks Rank 2 (Buy), indicating a positive outlook based on rising earnings estimates, which significantly influence stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [4][6]. - Institutional investors utilize earnings estimates to determine the fair value of stocks, leading to buying or selling actions that affect stock prices [4]. Company Performance and Outlook - The upgrade for Kennametal suggests an improvement in the company's underlying business, which is expected to drive the stock price higher [5]. - The Zacks Consensus Estimate for Kennametal indicates an expected earnings of $1.40 per share for the fiscal year ending June 2025, with a 2.4% increase in estimates over the past three months [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have averaged a +25% annual return since 1988 [7]. - Kennametal's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].