Kennametal’s 2Q Sales Crush Analysts’ Estimates

Kennametal Inc., a supplier of tooling and industrial materials, reported better-than-expected second-quarter results, sending its stock up 1.7% on Monday.

Kennametal’s (KMT) 2Q adjusted earnings of $0.16 per share came in ahead of the Street’s estimates of $0.09 but declined from $0.17 per share in the year-ago period. Its revenue of $440.5 million topped analysts’ expectations of $423.6 million but fell 13% year-over-year.

The double-digit decline in revenue reflects a 14% drop in organic sales. Meanwhile, divestiture negatively impacted its sales by 1%. However, foreign currency exchange rates had a favorable impact on net sales.

While the top-line declined on a year-over-year basis, it improved 10% sequentially, driven by improving demand, particularly in the transportation and general engineering end-markets.

Kennametal’s CEO Christopher Rossi said, “These end-market trends coupled with the progress on our growth initiatives and continued delivery of simplification/modernization benefits led to solid margin improvement and strong free operating cash flow in the quarter.” (See Kennametal stock analysis on TipRanks)

On Jan. 15, Jefferies analyst Stephen Volkmann raised the stock’s price target to $48 (22.1% upside potential) from $40 and maintained a Buy rating. In a note to investors, the analyst said that the December stimulus package should drive growth in industrials.

The Street has a cautiously optimistic outlook with a Moderate Buy consensus rating based on 2 Buys and 4 Holds. The average analyst price target of $37 implies downside potential of about 5.9% to current levels. Shares have gained about 29.3% over the past year.

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