Kennametal Q4 Earnings Call Highlights

Kennametal delivered record fiscal fourth-quarter results: Organic sales rose 42%, adjusted EPS reached $2.96 versus $0.34 a year earlier, and adjusted EBITDA margin expanded to 46.8%, driven largely by pricing, tariff surcharges, higher volumes and favorable tungsten-cost timing. For fiscal 2026, organic sales increased 19% and adjusted EPS climbed to $4.57 from $1.34, with growth supported by aerospace and defense, energy, mining, AI data-center projects and other industrial applications. Fiscal 2027 guidance calls for sales of $3.33 billion–$3.45 billion and adjusted EPS of $4.15–$5.15. Management expects favorable raw-material timing to boost first-half results but anticipates positive free cash flow only in the second half as tungsten-related working-capital pressures ease. 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%. President and Chief Executive Officer Sanjay Chowbey said the company won new business and expanded customer relationships across aerospace and defense, energy, transportation and earthworks. He also pointed to project wins connected to AI-powered data centers, defense programs, mining and next-generation vehicle powertrains. 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...