A month has gone by since the last earnings report for Kennametal (KMT Quick QuoteKMT - Free Report) . Shares have lost about 13.1% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Kennametal due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Kennametal Q4 Earnings & Sales Beat Estimates, Rise Y/Y

Kennametal reported adjusted earnings of $2.96 per share for the fourth quarter of fiscal 2026, up 770.6% year over year. The bottom line beat the Zacks Consensus Estimate of $2.31 by 28.1%.

Sales rose 42.6% year over year to $736.6 million and surpassed the consensus estimate of $720 million by 2.3%.

Sales Growth Spans End Markets

Reported sales growth reflected a 42% organic increase, a 1% favorable foreign-currency impact and a 1% benefit from business days, partly offset by a 1% divestiture drag. The Americas led constant-currency regional growth at 60%, followed by Asia Pacific at 28% and EMEA at 24%.

Energy sales jumped 101% in constant currency, while Earthworks advanced 76%. Aerospace & Defense rose 43%, General Engineering increased 28% and Transportation grew 7%. Management cited higher pricing, strategic wins and better market activity across several end markets.

Kennametal's Margins Expand Sharply

In the fiscal fourth quarter, Kennametal’s cost of goods sold decreased 18.3% year over year to $303.1 million. Operating expenses were $125.6 million, up 18.7% year over year.

Adjusted operating income was $305.7 million, translating into a 41.5% margin, compared with $38.2 million and 7.4% a year earlier. Adjusted EBITDA reached $345 million, with the margin expanding to 46.8% from 14.8%.

The improvement was driven mainly by about $252 million of favorable timing between raw material-related pricing and costs. Non-raw-material pricing, tariff surcharges, higher sales and production volumes and $5 million of restructuring savings also helped. Compensation costs, tariffs and inflation were offsets.

Metal Cutting Segment Advances

Metal Cutting revenues increased 24% year over year to $397.8 million. Organic sales rose 22%, supported by a 1% currency benefit and a 1% business-days contribution. Constant-currency sales climbed 29% in the Americas, 20% in Asia Pacific and 16% in EMEA.

Adjusted operating income totaled $108.4 million and adjusted operating margin expanded to 27.3% from 7.9%. Results benefited from roughly $54 million of favorable raw-material pricing timing, non-raw-material pricing, tariff surcharges, higher volume and $4 million of restructuring savings.

Kennametal's Infrastructure Results Surge

Infrastructure revenues rose 73% to $338.8 million, while organic sales increased 74%. A 1% currency benefit and a 1% business-days benefit were partly offset by a 3% divestiture impact. Constant-currency growth reached 103% in the Americas, 46% in EMEA and 40% in Asia Pacific.

Adjusted operating income was $197.9 million, with adjusted margin surging to 58.4% from 6.8%. About $198 million of favorable raw-material pricing timing drove the gain, partly offset by lower volume of sales and production, an increase in compensation costs and general inflation.

Cash Flow Feels Working Capital Strain

Fiscal 2026 cash used in operating activities was $4.0 million against $208.3 million generated in the prior year. Free operating cash flow was negative $79.1 million against positive $121.2 million, reflecting higher working capital needs tied to tungsten-driven inventory values and supplier advances.

Kennametal ended fiscal 2026 with $95.8 million in cash and cash equivalents, down from $140.5 million a year earlier. Inventories increased to $1.11 billion from $538.2 million, while long-term debt rose to $685.3 million from $596.8 million. The company paid $60.8 million in dividends during the year.

Kennametal's Fiscal 2027 Outlook

For the first quarter of fiscal 2027, it expects sales of $745-$775 million and adjusted earnings of $2.50-$2.80 per share. The outlook assumes 1-4% volume growth, 50-53% price and tariff-surcharge realization and a neutral foreign-exchange impact.

For fiscal 2027, sales are projected at $3.33-$3.45 billion, with adjusted earnings of $4.15-$5.15 per share. Management expects free operating cash flow of about 20% of adjusted net income and capital spending near $85 million. Share repurchases will remain on hold until cash flow becomes positive.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a upward trend in estimates review.

The consensus estimate has shifted 107.54% due to these changes.

VGM Scores

Currently, Kennametal has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for value investors.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Kennametal has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.