Kennametal reports 43% sales increase for fiscall fourth quarter
Kennametal Inc. announced fourth quarter sales of $737 million increased 43% and 42% on a reported and organic basis.
"Our team delivered strong fiscal 2026 results, reflecting volume from improving market conditions and our strategic growth initiatives," said President and CEOSanjay Chowbey. "We achieved record adjusted EPS this quarter through decisive pricing actions in an unprecedented tungsten environment, volume growth and cost improvement efforts.
"Looking ahead, we are encouraged by the volume trends we have seen across several end markets and expect those improving conditions, along with our strategic initiatives, to continue to drive sales growth throughout fiscal 2027," he continued. "Recent wins in the Aerospace & Defense, Energy and Earthworks end markets showcase the ability of our team to take share in any market condition. I am confident that our commitment to above market growth and continuous improvement will unlock long-term value for shareholders."
Fiscal 2026 Fourth Quarter Key Developments
Operating income was $303 million, or 41.1% margin, compared with $31 million, or 6.1% margin, in the prior year quarter. The increase in operating income was driven by the favorable timing of raw material-related pricing compared to costs of approximately $252 million, non-raw material-related pricing and tariff surcharges in Metal Cutting, higher sales and production volumes and incremental year-over-year restructuring savings of approximately $5 million. These factors were partially offset by higher compensation costs and tariffs and general inflation. Adjusted operating income was $306 million, or 41.5 percent margin, compared with $38 million, or 7.4% margin, in the prior year quarter.
Fiscal 2026 Key Developments
Sales of $2,357 million increased 20% from $1,967 million in the prior year, reflecting organic sales growth of 19 percent and a favorable foreign currency exchange effect of 2%, partially offset by a divestiture effect of 1 percent.
Operating income was $473 million, or 20.1% margin, compared with $143 million, or 7.3% margin, in the prior year. The increase in operating income was driven by the favorable timing of raw material-related pricing compared to raw material costs of approximately $316 million, non-raw material-related pricing and tariff surcharges in Metal Cutting, higher sales and production volumes and incremental year-over-year restructuring savings of approximately $27 million. These factors were partially offset by higher compensation costs, tariffs and general inflation, and fewer insurance proceeds received within Infrastructure in the current year. Adjusted operating income was $484 million, or 20.5% margin, compared with $158 million, or 8.0% margin, in the prior year.
The company's expectations for the first quarter of fiscal 2027 and the full year are as follows:
Quarterly Outlook:
Sales expected to be $745 - $775 million; foreign exchange anticipated to be neutral compared to the first quarter of fiscal 2026
Adjusted EPS is expected to be $2.50 - $2.80
Annual Outlook:
- Sales expected to be $3.33 - $3.45 billion; foreign exchange anticipated to be neutral compared to the fiscal 2026
- Adjusted EPS is expected to be $4.15 - $5.15
- Free operating cash flow of approximately 20 percent of adjusted net income
- Capital spending expected to be approximately $85 million
Fiscal 2026 Fourth Quarter Segment Results
Metal Cutting sales of $398 million increased 24% from $321 million in the prior year quarter, reflecting organic sales growth of 22%, a favorable foreign currency exchange effect of 1 percent and a favorable business days effect of 1 percent. Operating income was $106 million, or 26.7% margin, compared to $21 million, or 6.6% margin, in the prior year quarter. The increase in operating income was driven by the favorable timing of raw material-related pricing compared to costs of approximately $54 million, non-raw material-related pricing and tariff surcharges, higher sales and production volumes and incremental year-over-year restructuring savings of approximately $4 million. These factors were partially offset by higher compensation costs and general inflation in the current quarter. Adjusted operating income was $108 million, or 27.3% margin, compared to $25 million, or 7.9% margin, in the prior year quarter.
Infrastructure sales of $339 million increased 73% from $196 million in the prior year quarter, reflecting organic sales growth of 74%, a favorable currency exchange effect of 1 percent and a favorable business days effect of 1%, partially offset by a divestiture effect of 3%. Operating income was $197 million, or 58.3% margin, compared to $11 million, or 5.5% margin, in the prior year quarter. The increase in operating income was driven by the favorable timing of raw material-related pricing compared to costs of approximately $198 million, partially offset by lower sales and production volumes, higher compensation costs and general inflation in the current quarter. Adjusted operating income was $198 million, or 58.4% margin, compared to $13 million, or 6.8% margin, in the prior year quarter.
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