Kennametal (NYSE:KMT) reported sharply higher fourth-quarter and fiscal 2026 earnings, citing pricing actions tied to elevated tungsten costs, modest volume improvement, restructuring savings and stronger conditions in several industrial end markets.
For fiscal 2026, organic sales rose 19% year over year, while adjusted earnings per share increased to $4.57 from $1.34 in the prior year. Adjusted EBITDA margin expanded to 26.9% from 15.2%.
Fourth-Quarter Results Driven by Pricing and Material-Cost Timing
Fourth-quarter organic sales increased 42%, marking the company’s fourth consecutive quarter of organic growth. Adjusted EBITDA margin reached a record 46.8%, compared with 14.8% in the prior-year quarter, while adjusted operating margin rose to 41.5% from 7.4%.
Adjusted earnings per share was a record $2.96, compared with $0.34 a year earlier. Chief Financial Officer Pat Watson said results reflected strong price realization, including pricing actions and tariff surcharges, as well as continued volume improvement in the Metal Cutting business.
Watson said favorable timing between raw-material pricing and costs was a major contributor to the quarter’s margin and earnings performance. The company cited $252 million of favorable timing, along with non-raw-material pricing, tariff surcharges, higher sales and production volumes, and about $5 million in incremental restructuring savings. Those factors were partly offset by higher compensation costs, tariffs and general inflation.
At the segment level, Metal Cutting organic sales increased 22%, while Infrastructure organic sales grew 74%. Metal Cutting adjusted operating margin rose to 27.3% from 7.9%, and Infrastructure adjusted operating margin increased to 58.4% from 6.8%.
- Energy sales increased 101% on a constant-currency basis in the quarter.
- Earthworks sales rose 76%.
- Aerospace and defense sales increased 43%.
- General engineering sales grew 28%.
- Transportation sales increased 7%.
Management said total company volume grew at a low-single-digit rate during the quarter. Metal Cutting delivered mid-single-digit volume growth, while Infrastructure volume was approximately flat as the company prioritized customers and applications expected to generate the best returns on available tungsten and processing capacity.
Aerospace, Energy and Composite Tooling Opportunities
Chowbey described aerospace and defense as a structural growth engine, supported by recovering commercial aircraft production rates, easing supply-chain restrictions and projected increases in U.S. and NATO defense spending. He said aerospace and defense is now expected to become Kennametal’s third-largest end market.
The company highlighted cutting tools used to machine carbon fiber reinforced plastics, or CFRP, in aerospace. Chowbey said Kennametal competes in an approximately $500 million aerospace cutting-tool market for carbon-fiber composites that is expected to grow 9% annually through 2028. He said diamond-coated tools used for CFRP have recurring-revenue characteristics because they cannot be easily reconditioned and must be replaced after use.
Management also expects energy-market growth to strengthen. Chowbey said projections for U.S. land-based rig counts have shifted from a previously expected mid-single-digit decline to high-single-digit growth. The company also cited continued expansion in AI data-center power generation as support for energy demand.
Offsets include softer transportation conditions, with global light-vehicle production expected to decline by about 1% in fiscal 2027, primarily in the Americas and Europe. In earthworks, mining share gains are expected to be partly offset by softer coal markets in the U.S. and China.
Fiscal 2027 Outlook and Cash Flow Expectations
Kennametal forecast fiscal 2027 sales of $3.33 billion to $3.45 billion, including volume growth of 1% to 4% and pricing plus tariff surcharges of approximately 40% to 43%. Foreign exchange is expected to have a neutral effect on sales.
The company expects adjusted fiscal 2027 earnings per share of $4.15 to $5.15, with a midpoint of $4.65. The outlook assumes tungsten prices remain stable at current levels and that the Middle East conflict does not materially affect customer activity.
Watson said the full-year outlook includes about $0.39 per share of favorable raw-material pricing timing, concentrated in the first half and particularly in the first quarter. By the second half, the company expects tungsten pricing and costing to align more closely, reducing the benefit from timing.
For the fiscal first quarter, Kennametal expects sales of $745 million to $775 million and adjusted earnings per share of $2.50 to $2.80. That quarterly earnings outlook includes approximately $2.25 per share of favorable timing between raw-material pricing and costs.
Free operating cash flow was negative $79 million in fiscal 2026, compared with positive $121 million in the prior year, primarily because higher tungsten costs increased working-capital requirements. The company expects fiscal 2027 free operating cash flow to equal approximately 20% of adjusted net income, with positive free cash flow anticipated in the second half of the year.
At quarter-end, Kennametal had approximately $926 million of combined cash and revolver availability, including potential availability under an accordion feature. The company also had full availability under a new $500 million term loan and said it intends to draw the facility during the September quarter and use proceeds to reduce revolver borrowings.
About Kennametal (NYSE:KMT)
Kennametal Inc is a global industrial technology company that designs and manufactures advanced materials, tooling systems, and engineered components for a range of demanding applications. Its solutions support precision metalworking, earthmoving, and wear-resistant environments, catering to customers seeking enhanced productivity, longer tool life, and reduced operating costs.
The company’s product portfolio spans indexable cutting tools, solid round tools, tool holders, metalworking fluid systems, wear parts, ceramics and composites, and custom-engineered components.
