Industrial materials and tools company Kennametal (NYSE:KMT) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 9.8% year on year to $529.5 million. Guidance for next quarter’s revenue was optimistic at $555 million at the midpoint, 2.2% above analysts’ estimates. Its non-GAAP profit of $0.47 per share was 24.3% above analysts’ consensus estimates.
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Kennametal (KMT) Q4 CY2025 Highlights:
- Revenue: $529.5 million vs analyst estimates of $524.4 million (9.8% year-on-year growth, 1% beat)
- Adjusted EPS: $0.47 vs analyst estimates of $0.38 (24.3% beat)
- Adjusted EBITDA: $95.74 million vs analyst estimates of $80.95 million (18.1% margin, 18.3% beat)
- The company lifted its revenue guidance for the full year to $2.22 billion at the midpoint from $2.14 billion, a 4% increase
- Management raised its full-year Adjusted EPS guidance to $2.25 at the midpoint, a 50% increase
- Operating Margin: 9.9%, up from 6.6% in the same quarter last year
- Organic Revenue rose 10% year on year (beat)
- Market Capitalization: $2.92 billion
StockStory’s Take
Kennametal’s fourth quarter performance drew a positive market response, as the company delivered revenue growth above Wall Street expectations and meaningful margin expansion. Management attributed these results to a combination of successful pricing actions in response to higher tungsten costs, modest gains in key end markets, and ongoing progress in cost improvement initiatives. CEO Sanjay Chowbey highlighted that project wins in commercial segments and operational discipline helped drive the quarter, while emphasizing, “We continue to make steady progress on our strategic growth initiatives, lean transformation, and structural cost improvement.”
Looking ahead, Kennametal’s raised outlook is built on expectations of sustained pricing power, continued restructuring benefits, and incremental volume improvement in targeted end markets. Management indicated that pricing will remain a critical lever as raw material costs, particularly tungsten, stay elevated, and noted ongoing efforts to optimize the product mix and manufacturing footprint. CFO Michael Pici stated, “The increased outlook reflects additional pricing actions related to the increase in the cost of tungsten since we provided our prior outlook.” The company also expects restructuring savings to contribute further to profitability as the year progresses.
Key Insights from Management’s Remarks
Management credited the quarter’s outperformance to pricing strategies amid rising raw material costs, targeted project wins, and execution of cost reduction programs.
- Tungsten price response: The company aggressively implemented pricing actions to offset a sharp increase in tungsten costs, with CEO Sanjay Chowbey noting, “Prices of tungsten have gone up a lot… but our customers also see this dynamic and have been monitoring it closely.”
- End market project wins: Kennametal secured several new projects in aerospace, energy, and mining, leveraging its materials science capabilities and engineering support. Chowbey cited expanding share in aerospace and customer traction in energy for power generation as notable contributors.
- Manufacturing footprint optimization: The firm continued executing its restructuring plan, closing two manufacturing plants and divesting a business in the past year. Management said these actions are producing $30 million in annual savings.
- Demand trends by segment: Transportation volumes stabilized compared to prior quarters, while the Americas showed improvement in general engineering demand. However, transportation in EMEA remained in low single-digit negative territory, and management is watching for further progress.
- Competitive landscape and product positioning: Kennametal emphasized its differentiated offering through application engineering and partnerships, particularly in digital machining solutions and support for both traditional and emerging drivetrain technologies in transportation.
Drivers of Future Performance
Management expects future performance to be anchored by pricing discipline, ongoing cost savings, and a gradual recovery in select industrial markets.
- Pricing as a key lever: Management intends to maintain price actions as long as raw material costs, mainly tungsten, remain high. They indicated that list prices can adjust with a three-month lag in metal cutting, and surcharges could be rolled back if input costs normalize.
- Restructuring and cost savings: Ongoing restructuring initiatives are expected to deliver $30 million in incremental savings this year and reach a $125 million run rate by year-end. These efforts include plant closures and operational streamlining.
- Market demand recovery: The company anticipates slight volume growth, particularly in the Americas general engineering sector, while transportation and EMEA demand trends are expected to remain flat to modestly positive. Management is monitoring early indicators like purchasing manager indices (PMIs) for signs of broader industrial recovery.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will focus on (1) the company’s ability to maintain pricing power amid ongoing volatility in tungsten costs, (2) progress and realization of savings from restructuring and plant closures, and (3) sustained momentum in project wins within aerospace, energy, and general engineering. Additionally, early signs of demand recovery in key end markets and the impact of digital machining solutions will be key areas to watch.
Kennametal currently trades at $38.15, up from $35.76 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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