Back to top

Analyst Blog

We recently reiterated our recommendation on Kennametal Inc. (KMT - Analyst Report) at Neutral, anticipating the company to perform in line with the broader market.
Why Neutral?

Kennametal Inc. seems well positioned as a major player in the machine tools and accessories industry. The company has compelling long-term growth prospects and is equipped well to leverage benefits from the rising exposure to emerging markets.

The company has adopted various strategic initiatives that have proven very advantageous for its growth over time. Accretive acquisitions and dispositions of non-core assets is one of the favoured policies of Kennametal.

Of all, acquisition of Deloro Stellite Holdings in 2012 has strengthened the company’s product portfolio offered under the company’s Infrastructure segment. Also, mention may be made of the recent acquisition of Emura that will diversify and balance the company’s tungsten sourcing capabilities. This acquisition is expected to be immediately accretive to earnings.

Kennametal also follows a consistent policy of rewarding its shareholders by paying quarterly dividends, garnished with regular increases, and repurchasing shares. In Jul 2012, the company’s board of directors approved a 14% hike in its quarterly dividend rate and increased its share buyback program from 8 million shares to approximately 12 million shares.

Notwithstanding these positives, near-term concerns surrounding the stock have forced us to remain on the sidelines for Kennametal. A look into the last reported quarter and the guidance provided by management justify our concerns.

Kennametal’s financial performance in the three quarters of fiscal 2013 has been quite disappointing. Demand in the industrial and infrastructure markets was weak throughout which led to considerable decline in organic revenue while currency translation negatively impacted total revenue growth.

Management for fiscal 2013 anticipates no major change in end market demands and, hence, increased its organic and total revenue decline forecasts. Earnings per share guidance have also been revised down and cash flow from operations is expected to be lower than the prior forecast.

Other Stocks in the Industry

Kennametal Inc. currently has a market capitalization of $3.2 billion. Other stocks to watch out for in the industry are Lincoln Electric Holdings Inc. (LECO - Analyst Report), with a Zacks Rank #1 (Strong Buy) while Chart Industries Inc. (GTLS - Snapshot Report) and Gardner Denver Inc. , each has a Zacks Rank #2 (Buy).

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
BANCO DO BR… BDORY 14.54 +4.23%
ERBA DIAGNO… ERB 3.69 +3.94%
AIR INDUSTR… AIRI 9.90 +3.23%
EQT MIDSTRE… EQM 98.00 +3.23%
WEATHERFORD… WFT 23.67 +3.23%