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KENNAMETAL INC (KMT)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 2025 revenue was $516.45M, down 5% YoY; adjusted EPS was $0.34, both below S&P Global consensus ($527.56M revenue, $0.39 EPS). Weak volumes, tariff headwinds (~$4M), and restructuring/divestiture charges weighed on margins; adjusted operating margin fell to 7.4% from 11.5% YoY .*
  • FY26 guidance introduced: sales $1.95–$2.05B; adjusted EPS $0.90–$1.30; FOCF ~120% of adjusted net income; capex ~$90M. Q1 FY26 sales guide $465–$485M; adjusted EPS $0.20–$0.30 .
  • Cost actions accelerated: run-rate pre-tax savings achieved reached ~$65M by 6/30/25, with target lifted to $125M by June 2027 (exceeding prior $100M Investor Day goal). Footprint consolidation expanded (Greenfield, MA closure; Barcelona consolidation; Goshen, IN divestiture) .
  • Strategic wins provide medium-term offsets: multi-year $25M U.S. Defense award; wins supporting AI data center power generation; management expects aerospace & defense to grow low double digits in FY26 .

What Went Well and What Went Wrong

What Went Well

  • Secured notable orders and share gains: “Infrastructure team secured a $25 million multi-year award with a U.S. Defense customer… wins in power generation supporting AI data centers” .
  • Structural cost progress: achieved ~$65M run-rate savings since FY24; incremental $6M restructuring savings in Q4; annualized run-rate for January actions raised to ~$35M vs original $15M .
  • Pricing and IRA credit/tornado benefits provided partial offsets: Q4 included price/mix and a net $7M tornado-related benefit in Infrastructure; FY25 saw ~$13M IRA advanced manufacturing production credit and $12M net tornado-related benefit .

What Went Wrong

  • Volumes and margins compressed: Q4 sales down 5% YoY to $516.45M; reported operating margin fell to 6.1%, adjusted to 7.4% vs 11.5% YoY .
  • Tariffs, inflation, and divestiture loss: net tariff effect ~-$4M, higher wages/raw materials, and ~$2M loss from Goshen divestiture pressured operating income .
  • End-market softness and supply chain disruptions: broad-based weakness across regions/end-markets; temporary aerospace/defense supply-chain disruption; lower rig counts in the Americas; mining pressure in earthworks .

Financial Results

Headline Metrics: Sequential Trend (oldest → newest)

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD Millions)$482.05 $486.40 $516.45
Reported EPS ($)$0.23 $0.41 $0.28
Adjusted EPS ($)$0.25 $0.47 $0.34
Operating Income ($USD Millions)$31.67 $44.06 $31.37
Reported Operating Margin (%)6.6% 9.1% 6.1%
Adjusted Operating Margin (%)6.9% 10.3% 7.4%

Year-over-Year Comparison (Q4 2024 → Q4 2025)

MetricQ4 2024Q4 2025
Revenue ($USD Millions)$543.31 $516.45
Reported EPS ($)$0.47 $0.28
Adjusted EPS ($)$0.49 $0.34
Reported Operating Margin (%)11.3% 6.1%
Adjusted Operating Margin (%)11.5% 7.4%

Segment Breakdown (Q4 2025 vs Q4 2024)

SegmentSales ($USD Millions) Q4 2024Sales ($USD Millions) Q4 2025Operating Income ($USD Millions) Q4 2024Operating Income ($USD Millions) Q4 2025
Metal Cutting$334.54 $320.65 $44.12 $21.07
Infrastructure$208.76 $195.80 $17.84 $10.70

Geographic Sales (Q4 2025 vs Q4 2024)

RegionQ4 2024 Sales ($USD Millions)Q4 2025 Sales ($USD Millions)
Americas$274.40 $254.26
EMEA$162.66 $158.40
Asia Pacific$106.25 $103.78

KPIs

MetricFY 2025
Free Operating Cash Flow ($USD Millions)$121.19
Net Cash from Operating Activities ($USD Millions)$208.32
Capital Expenditures ($USD Millions)$88.97
Shares Repurchased (Q4, thousands)232; $5M
Dividend per Share (Q4)$0.20 declared; $15M paid
Run-Rate Savings Achieved (as of 6/30/25)~$65M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SalesFY25$1.95–$2.00B (Feb 5) $1.97–$1.99B (May 7) Tightened slightly higher midpoint
Adjusted EPSFY25$1.05–$1.30 (Feb 5) $1.30–$1.45 (May 7) Raised
Actual ResultsFY25—Sales $1.967B; Adj EPS $1.34 Met within raised range
SalesFY26—$1.95–$2.05B New
Adjusted EPSFY26—$0.90–$1.30 New
FOCF (% of Adj NI)FY26—~120% New
CapexFY26—~$90M New
SalesQ1 FY26—$465–$485M New
Adjusted EPSQ1 FY26—$0.20–$0.30 New
DividendNext Pay Date—$0.20 per share payable Aug 26, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2025)Trend
Tariffs and mitigationUncertainty noted; planned mitigation and surcharges (Q3 PR) Net ~$0.04 EPS headwind in Q4; expect tariff surcharges/ops to cover going forward Improving coverage; margin drag persists short term
Structural cost actionsJan 2025 actions targeting $15M run-rate by FY25 (Q2 PR) Achieved ~$65M run-rate; program enlarged to $125M savings by FY27 Accelerating savings; expanded footprint consolidation
End-market demandWeakness across EMEA/Americas; mining/transport declines (Q2/Q3 PRs) FY26 outlook: aerospace & defense low double-digit growth; transportation/earthworks down mid-single-digit; energy flat Mixed: aerospace/defense up; cyclical end-markets remain soft
Supply chainTemporary aerospace/defense customer disruption (Q4 commentary) Rerouting internal supply chains, leveraging global footprint Operational mitigation in progress
AI/technology exposureNo prior explicit AI calloutsWins in power generation for AI data centers Emerging secular tailwind
Raw materials/tungstenFavorable timing vs pricing in prior quarters (Q2/Q3 PRs) Tungsten costs up; expecting price pass-through neutralization by late FY26 (Q3–Q4 commentary) Near-term margin pressure, neutralizing by Q4 FY26

Management Commentary

  • “We successfully executed tariff mitigation actions… rerouted internal supply chain… implemented surcharges… committed to fully offsetting the impact moving forward.”
  • “We have achieved run rate savings of approximately $65,000,000… expect approximately $90,000,000 by the end of fiscal 2026.”
  • “Capacity optimization remains one of our top priorities… complete this in two phases… updated cost savings of $125,000,000 exceeding our original target.”
  • CFO: “Adjusted EBITDA margin was 14.8% versus 17.7% in the prior year quarter… decline primarily from lower volumes and unfavorable tariffs net of surcharges.”
  • CFO: “We continue to maintain a healthy balance sheet and debt maturity profile with $840,000,000 of cash and revolver availability at quarter end.”

Q&A Highlights

  • Outlook cadence and tariffs: Q1 sequential seasonality expected with pricing/FX tailwinds; tariff surcharges/ops coverage in place though margin compression persists near term .
  • Structural actions differentiation: CEO emphasized footprint/organizational/material sourcing changes are “sustainable,” with margins improving when volumes recover .
  • Tungsten pass-through: CFO expects tungsten price pass-through to lift Infrastructure margins early, with neutrality achieved by late Q3 to Q4 FY26 based on current trends .
  • Portfolio optimization: CEO reiterated ongoing evaluation and actions to improve mix and performance, with more to come; sees share gains in aerospace/defense .
  • End-market color: Energy expected flat despite lower rig counts due to higher material content in O&G tools; aerospace/defense improving as OEM production/supply chain normalize .

Estimates Context

MetricQ2 2025 EstimateQ2 2025 ActualVarQ3 2025 EstimateQ3 2025 ActualVarQ4 2025 EstimateQ4 2025 ActualVar
Revenue ($USD Millions)$487.61*$482.05 -$5.56*$489.30*$486.40 -$2.90*$527.56*$516.45 -$11.11*
EPS (Primary, $)$0.26*$0.25 (adj), $0.23 (rep) -$0.01* (adj)$0.24*$0.47 (adj), $0.41 (rep) +$0.23* (adj)$0.39*$0.34 (adj), $0.28 (rep) -$0.05* (adj)
EBITDA ($USD Millions)$70.23*$66.998*-$3.23*$68.67*$83.74*+$15.07*$83.42*$72.03*-$11.39*

Values retrieved from S&P Global.*

Implications:

  • Q4 misses on revenue and adjusted EPS; Q3 significantly beat EPS on IRA credit and operational benefits; Q2 slightly below estimates. Expect analysts to lower near-term margin assumptions (tariff/raw materials) while monitoring FY26 pricing/tariff surcharge realization and cost-savings ramp .

Key Takeaways for Investors

  • Near-term headwinds drove a Q4 miss vs consensus; tariff costs (~$4M), lower volumes, and restructuring/divestiture impacts compressed margins; watch the cadence of FY26 price/tariff surcharge realization .*
  • Structural program expanded: savings target increased to $125M by FY27; footprint consolidations (6 total across phases) should structurally lower cost base and support margin recovery when volumes rebound .
  • End-market mix improving: aerospace & defense expected low double-digit growth; strategic wins (including $25M defense award and AI data center-related power generation) provide secular offsets to cyclicals .
  • Tungsten inflation manageable: management expects pass-through to neutralize margin impact by late FY26; short-term infrastructure margin lift possible as pricing flows through .
  • Cash returns intact: quarterly dividend maintained at $0.20 and ongoing buybacks ($5M in Q4); FOCF discipline continues with FY26 FOCF ~120% of adjusted net income .
  • FY26 guide is balanced amid macro uncertainty: sales $1.95–$2.05B and adjusted EPS $0.90–$1.30; monitor volumes in transportation/earthworks and FX tailwinds, plus IRA/tornado one-time lap in FY25 that creates EPS headwinds in FY26 .
  • Trading lens: stock likely reacts to narrative around tariff coverage, tungsten pass-through, and visibility into aerospace/defense demand. Any evidence of sequential order stabilization or accelerated cost-savings realization would be a positive catalyst .