Kennametal’s second quarter results were marked by robust year-on-year growth, but the market responded negatively, reflecting lingering concerns despite the headline beats. Management attributed performance to decisive price increases in response to elevated tungsten costs, alongside gains in aerospace, defense, energy, and AI data center end markets. CEO Sanjay Chowbey emphasized that “the combination of expertise, innovation and global operations is a strong competitive advantage for us.” The quarter also benefited from ongoing cost takeout programs, with $27 million in restructuring savings, but free cash flow remained challenged by increased working capital tied to raw material prices.
Is now the time to buy KMT? Find out in our full research report (it’s free for active Edge members).
Kennametal (KMT) Q2 CY2026 Highlights:
- Revenue: $736.6 million vs analyst estimates of $726.9 million (42.6% year-on-year growth, 1.3% beat)
- Adjusted EPS: $2.96 vs analyst estimates of $2.31 (28.4% beat)
- Revenue Guidance for Q3 CY2026 is $760 million at the midpoint, above analyst estimates of $664.7 million
- Adjusted EPS guidance for the upcoming financial year 2027 is $4.65 at the midpoint, beating analyst estimates by 22%
- Operating Margin: 41.1%, up from 6.1% in the same quarter last year
- Organic Revenue rose 42% year on year (beat)
- Market Capitalization: $2.30 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Kennametal’s Q2 Earnings Call
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Angel Castillo (Morgan Stanley) asked about the normalized earnings run rate post-tungsten benefit. CFO Patrick Watson clarified the adjustment process, stating that current normalized EPS is around $1.64 after removing price/raw material effects, with the first half of the year benefiting more from these tailwinds.
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Steve Barger (KeyBanc Capital Markets) inquired about material allocation in the Infrastructure segment. CEO Sanjay Chowbey explained the company prioritized allocation for the best returns, but did not face an outright tungsten shortage.
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Chris Dankert (D.A. Davidson) requested clarification on the price/cost bridge for fiscal 2027. Watson detailed that the $0.39 raw material tailwind would mostly impact the first half, with normal wage inflation and volume effects embedded in the outlook.
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Stephen Volkmann (Jefferies) probed the implied EBITDA run rate exiting the year, citing mid-teens margin expectations. Watson confirmed the mid-teens target and outlined the transition to normalized earnings as raw material timing effects dissipate.
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Chris Dankert (D.A. Davidson) asked about the use and materiality of tariff recovery benefits. Chowbey said refund receipts were immaterial, and that any recovered funds would be reinvested into supply chain security and product development.
Catalysts in Upcoming Quarters
Our analysts will be monitoring (1) the sustainability of price realization as tungsten and other input costs remain elevated, (2) continued market share gains in aerospace, defense, and AI data center infrastructure, and (3) progress on turning free cash flow positive as working capital pressures ease in the second half of the year. Execution on restructuring savings and channel expansion will also be important indicators.
Kennametal currently trades at $30.47, down from $36.06 just before the earnings. Is there an opportunity in the stock? Find out in our full research report (it’s free).
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