Kennametal (KMT) Q1 2027 Earnings Report

The call was positive overall: first-quarter sales and adjusted EPS exceeded the midpoint of guidance, Metal Cutting delivered a fourth consecutive quarter of volume growth, strategic growth initiatives and lean transformation produced measurable gains, and full-year sales guidance was maintained. However, the company continues to face significant cash-conversion pressure, infrastructure volume declines, tariff costs, and expected second-half tungsten price-timing headwinds.

For fiscal 2027, Kennametal expects sales to be between $3.35 and $3.45 billion, volume ranging from 1% to 4%, net price and tariff surcharge combined of approximately 40% to 43%, and foreign exchange to be neutral, assuming tungsten prices remain stable at the current approximate $2.7 thousand level; adjusted EPS is expected to be in the range of $5 to $6, including an approximate $0.97 tailwind related to the timing of price-raw, with a benefit of $1.00 in Q2, a headwind of $0.55 in Q3, and a headwind of $2.62 in Q4. The company expects headwinds from price-cost to extend into Q4 and to exit Q4 with a low double-digit EBITDA margin, while full-year capital expenditures and free operating cash flow outlook remain unchanged. For Q2, sales are expected to be between $785 million and $815 million, volume ranging from 1% to 4%, price and tariff surcharges in the range of 47% to 50%, foreign exchange neutral, interest expense approximately $11 million, effective tax rate 25%, and adjusted EPS in the range of $1.20 to 1.50, including approximately $1.00 of favorable timing of raw material pricing compared to cost; infrastructure volume recovery is expected to be modest in Q2, with the majority in the second half of FY 27. Beyond fiscal 27, the company expects 16% to 19% EBITDA margins assuming a stable elevated tungsten price environment, with long-term end market growth potential of 1% to 2% compound annual growth rate, share gain of 100 to 200 basis points, and operating leverage in the mid thirties.