Kennametal’s second quarter was marked by continued end-market softness and execution of structural cost initiatives, with the company missing Wall Street’s expectations for both revenue and profit. Management cited lower global production volumes, declines in U.S. land-based rig counts, and slowing vehicle production—especially in Europe—as the main drivers of the shortfall. CEO Sanjay Chowbey acknowledged, “The results reflect the continued broad market weakness that has impacted our end markets for the past 8 quarters,” and pointed to restructuring savings and portfolio optimization as partial offsets against these headwinds.
Is now the time to buy KMT? Find out in our full research report (it’s free).
Kennametal (KMT) Q2 CY2025 Highlights:
- Revenue: $516.4 million vs analyst estimates of $526.4 million (4.9% year-on-year decline, 1.9% miss)
- Adjusted EPS: $0.34 vs analyst expectations of $0.39 (13.1% miss)
- Adjusted EBITDA: $76.76 million vs analyst estimates of $83.42 million (14.9% margin, 8% miss)
- Revenue Guidance for Q3 CY2025 is $475 million at the midpoint, below analyst estimates of $489 million
- Adjusted EPS guidance for the upcoming financial year 2026 is $1.10 at the midpoint, missing analyst estimates by 23.4%
- Operating Margin: 6.1%, down from 11.3% in the same quarter last year
- Organic Revenue fell 5% year on year vs analyst estimates of 3.1% declines (187.9 basis point miss)
- Market Capitalization: $1.57 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Kennametal’s Q2 Earnings Call
- Angel Castillo (Morgan Stanley) asked how much of the cost actions were in response to Kennametal-specific issues versus broader macro demand. CEO Sanjay Chowbey replied it was a combination of both, emphasizing that rightsizing would provide sustainable, long-term benefits regardless of market recovery.
- Julian Mitchell (Barclays) questioned the sustainability of restructuring programs, noting past challenges in delivering margin expansion. Chowbey responded that this plan involves deeper structural actions, with confidence that savings will be sustainable and evident when volumes rebound.
- Stephen Volkmann (Jefferies) pressed on the impact of rising tungsten costs and why margin benefits were not more visible in guidance. CFO Pat Watson explained that while price increases will be passed on, the lack of volume growth means margin expansion is muted versus typical cycles.
- Tami Zakaria (JPMorgan) inquired about the flat energy outlook despite declining rig counts. Chowbey clarified that higher materials costs offset expected volume declines, keeping reported revenue flat but with lower underlying unit sales.
- Robert Stephen Barger (KeyBanc Capital Markets) asked if competitive pressure or structural industry changes explain stagnant revenue. Chowbey argued Kennametal is not losing share, attributing weak volume to cyclical downturns and emphasizing new wins in aerospace and defense.
Catalysts in Upcoming Quarters
Looking ahead, our analyst team will be closely monitoring (1) the pace and impact of plant consolidations and restructuring savings, (2) whether volume trends in Transportation, Energy, and Earthworks stabilize or deteriorate further, and (3) the company’s ability to offset raw material and tariff-related margin pressures through pricing and surcharges. Execution on portfolio optimization and early signs of recovery in key end markets will also be essential indicators.
Kennametal currently trades at $20.62, down from $25.12 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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