Kennametal (KMT) Q4 FY26 earnings call: guidance and Q&A

Reconciling the FY27 EPS guide with prior normalized earnings expectations, specifically regarding the impact of tungsten pricing. Analyst noted a prior normalized EPS of ~$1.60 and an implied $1.15 from the current bridge.

Pat Watson clarified that the 'clean FY26' normalized EPS was $1.63 (or $1.64 with Q4 actuals). He explained that the FY27 bridge includes a $0.39 raw material timing benefit, but this benefit will reverse in the second half of the year, making the first half positive and the second half a headwind year-over-year. He advised taking out the full tungsten impact from FY26 ($2.43) and FY27 ($0.39) to get a normalized view.

“I would say if you think about those numbers in the context now of what actually happened in the fourth quarter, EPS came in a bit higher, $4.57, really driven by a little bit of pricing, a little bit of raw material. That's why that price raw number went from $2.45 to $3.11, right? And then that comp number came in a little bit tighter. And so that's an $0.18 tailwind going into FY '27, so $1.64.”

asked by Angel Castillo Malpica · answered by Patrick Watson

Inquired about total company volume growth in Q4 and how current order trends align with the 1% to 4% FY27 volume guidance.

Pat Watson stated Q4 total company volume was up low single digits, with Metal Cutting in mid-single digits and Infrastructure flat due to prioritization choices. Sanjay Chowbey added that the 1% to 4% FY27 volume guidance includes 1% to 2% from share gains/initiatives and the rest from market growth, with Aerospace & Defense and Energy being the strongest segments.

“So if you look at the overall volume growth that we have said, 1% to 4% in that share gain will be 1% to 2%. rest is market.”

asked by Angel Castillo Malpica · answered by Sanjay Chowbey

Asked if prioritizing sales in Energy and General Engineering meant the company was short on material and lost potential sales.

Sanjay Chowbey clarified that the company was not short on material but was strategically allocating its tungsten and processing capacity to drive the best returns, especially given the higher tungsten consumption in certain growth areas like aerospace and defense. He noted that they could take more business if more tungsten material was available.

“No, Steve. We are not short. What we're saying is that if as we see the growth in overall volume, including in aerospace and defense and the areas, where we do consume a lot more tungsten, we did prioritize what will drive the best return for our shareholders and how we get the best return on tungsten that we have.”

asked by Steve Barger · answered by Sanjay Chowbey

Sought clarification on the $0.53 operations bucket in the FY27 EPS bridge, noting that after backing out specific items, it implied a negative impact from core volume/wage inflation.

Pat Watson explained that the $0.53 operations bucket includes the $0.39 raw material timing favorability, lower incentive comp, and restructuring benefits, offset by normal wage inflation. He indicated that the outlook has variability due to the amount of tungsten and pricing efforts.

“You should have some favorability coming through, obviously, on the restructuring. We're going to have a little bit of, I'll just call it, the normal wage inflation and things like that, that are going on in the course of the business.”

asked by Christopher Dankert · answered by Patrick Watson

Confirmed the mid-teens EBITDA margin exit rate for Q4 FY27 and asked if an annualized EBITDA run rate of ~$600 million was a correct interpretation.

Pat Watson confirmed the mid-teens EBITDA margin for Q4 FY27 as a 'clean price raw quarter' for modeling FY28. He suggested using the FY27 sales outlook of ~$3.4 billion as a base for FY28, adding incremental price and volume, and then applying normal seasonality to the Q4 exit rate to project FY28 EBITDA. He did not confirm the $600M figure directly but provided the methodology.

“From an EBITDA perspective, yes, that fourth quarter, mid-teens EBITDA, right, that we expect based on what we know today, that's going to be a clean price raw quarter, right? And so then you can apply, say, normal seasonality of the business then going forward to really generate what that FY '28 EBITDA profile would be.”

asked by Stephen Volkmann · answered by Patrick Watson