Kennametal(KMT) ZACKS·2025-03-25 17:26Core Viewpoint - Kennametal Inc. (KMT) has underperformed in operational performance due to business weaknesses and high operational expenses, leading to disappointing investor sentiment [1]. Business Performance - The Metal Cutting segment has experienced a 4% year-over-year revenue decline in the second quarter of fiscal 2025, attributed to decreased demand in the transportation end market [2]. - The Infrastructure segment also faced challenges, with organic revenues declining 4% year-over-year in the same quarter due to reduced industrial activity and lower customer capital investment [3]. Revenue Expectations - KMT anticipates revenues for fiscal 2025 to be between 2.0 billion, indicating a year-over-year decrease of approximately 3.5% at the midpoint [4]. Stock Performance - Over the past six months, KMT's stock has declined by 11.5%, compared to a 5.3% decline in the industry [7]. Operating Expenses - The company's operating expenses rose by 1.8% year-over-year in the second quarter of fiscal 2025, with operating expenses as a percentage of total revenues increasing by 100 basis points to 22.7% [7]. - The Metal Cutting segment's operating margin decreased by 10 basis points due to higher wages, inflation, and manufacturing costs [8]. Foreign Exchange Impact - KMT's global operations expose it to foreign exchange risks, which negatively impacted the Metal Cutting segment's revenues by 1% in the first half of fiscal 2025 [8]. Earnings Estimates - The Zacks Consensus Estimate for KMT's fiscal 2025 earnings has decreased from 1.17, with four downward revisions and no upward revisions [9]. - The consensus estimate for fiscal 2026 earnings has also declined from 1.37, reflecting similar downward revisions [9].