Kennametal (KMT) Stock Forecast & Price Target

Kennametal is supported by an unusual combination of strong pricing power, resilient supply access, and improving end-demand, which together should underpin earnings and cash generation. FY4Q sales of $737M beat consensus by 2%, adjusted EPS of $2.96 topped estimates by $0.65, and gross margin expanded to 58.9% from 28.2% a year ago, largely from favorable price/cost timing and roughly 39% year-over-year pricing gains. The company’s Bolivia-and-recycling-based tungsten sourcing has insulated it from Chinese export restrictions, while FY27 guidance for 41%-46% sales growth and positive free cash flow beginning in FY3Q, despite higher interest expense and working capital needs, signals operating leverage as volume trends improve.

Kennametal is facing a fundamentally weak earnings profile because its recent EPS strength is being driven largely by a temporary tungsten price/raw-material timing benefit of about $2.45 that should roll off as prices stabilize, leaving core earnings near $1.30-$1.55 in FY26 and only about $1.98 in FY27. Modest volume gains of roughly 3% are being more than offset by inflationary wage and input costs, while higher debt, interest expense, and elevated working-capital needs are suppressing free cash flow, which was guided at -30% of adj. net income in FY26. Although FY27 sales guidance of $3.33-$3.45B and adj. EPS of $4.15-$5.15 appears solid, the mix of non-durable pricing support, trade volatility, and recurring restructuring reliance suggests durability and margin expansion remain limited.