Kennametal (NYSE:KMT) Q2 2026 Earnings call February 04, 2026 09:00 AM ET Speaker4Good morning. I would like to welcome everyone to Kennametal's second quarter and fiscal 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star, then the number one on your telephone keypad. If you would like to withdraw your question, plea ...

Financial Data and Key Metrics Changes - Sales increased by 3% organically year over year, marking the first quarter of organic growth in two years [6][11] - Adjusted EPS rose to $0.34 compared to $0.29 in the prior year quarter [6][12] - Adjusted EBITDA margin improved to 15.3% from 14.3% in the prior year quarter [7][12] - Cash from operating activities was $17 million compared to $46 million in the prior year period, while free operating cash flow was negative $5 million compared to positive $21 million [7][17] Business Line Data and Key Metrics Changes - Metal cutting sales were up 5% year over year, with 3% organic growth [14] - Infrastructure sales increased 3% organically, with reported sales growth of 1% [15] - Aerospace and defense grew 20%, earthworks grew 5%, energy increased 1%, general engineering was flat, and transportation declined 1% [11][15] Market Data and Key Metrics Changes - Sales in the Americas increased 7%, EMEA was flat, and sales decreased 1% in Asia-Pacific [11] - Transportation market outlook improved slightly, while aerospace and defense expectations are strengthening due to recovery from supply chain challenges [8][11] Company Strategy and Development Direction - The company is focusing on strategic growth initiatives, particularly in power generation and infrastructure [4][9] - There is a commitment to offsetting tariff impacts through product moves, supply chain optimization, and pricing actions [5][6] - The company is exploring ways to strengthen its portfolio while monitoring external drivers such as trade and monetary policies [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term value creation despite potential external challenges [22] - The outlook for FY26 sales is projected to be between $2.1 billion and $2.17 billion, with adjusted EPS expected in the range of $1.35-$1.65 [19][21] - The company anticipates a modest improvement in market conditions and pricing actions to address rising costs [19][21] Other Important Information - The company returned $25 million to shareholders through share repurchases and dividends [18] - The adjusted tax rate for the year is now projected at 27% [19] Q&A Session Summary Question: Can you clarify the end market outlook and what is driving the material uplift? - Management noted that project wins, share gains, and APT-related price increases are driving the uplift across end markets [26][30] Question: What is the market share dynamic and how are you addressing tungsten price increases? - The share gain is driven by innovative solutions, commercial excellence, and operational performance, with confidence that customers will continue to prefer their products despite higher tungsten prices [31][36] Question: How much of the $250 million TAM from engines is volume versus pricing? - The $250 million includes both volume and pricing dynamics, with a projected growth rate of 10% for the next few years [41][42] Question: What is driving the improved outlook for the energy end market? - The energy outlook improved due to APT-related price increases and stable oil and gas market conditions [43][44] Question: Can you discuss the dynamics of price cost impact in your guidance? - The guidance reflects positive price raw dynamics, with expectations for neutrality in Q4 unless tungsten prices change [70][71]