KMT: Future Returns Will Depend On Sustained Tungsten Pricing Power

Analysts have lifted their price target on Kennametal by $3 to $28, citing a positive inflection in growth from higher tungsten prices, better than expected Q1 results with improving pricing power, and raised FY26 EPS guidance.

Analyst Commentary

Recent Street research reflects a mixed but improving stance on Kennametal, with price targets moving higher as earnings quality and growth signals strengthen, even as questions remain around durability of the recovery.

Bullish Takeaways

• Bullish analysts see the higher price of tungsten as a key driver of a positive inflection in growth, supporting revenue and margin expansion assumptions in their models.
• Stronger than expected Q1 results, including segment EBIT running well ahead of consensus and a return to organic sales growth after a two year lull, are viewed as evidence of improving execution.
• Management's decision to raise FY26 EPS guidance, citing better pricing benefits, underpins higher valuation targets and suggests improved confidence in medium term earnings power.
• The lift in price targets is interpreted as a sign that the market is beginning to re rate the shares toward a more normalized mid cycle earnings and multiple framework.

Bearish Takeaways

• Bearish analysts maintain cautious ratings even with higher price targets, arguing that the stock already discounts a meaningful portion of the early cycle recovery.
• There is concern that sustained growth momentum has yet to be demonstrated, with the recent quarter seen as an initial step rather than proof of a durable trend.
• Some remain wary that pricing benefits, including those tied to tungsten, could moderate over time, potentially capping upside to EPS relative to current guidance.
• Execution risk around maintaining elevated margins and converting early demand improvements into consistent free cash flow is cited as a constraint on further multiple expansion.

What's in the News

• Kennametal issued new earnings guidance for the second quarter of fiscal 2026, projecting sales between $500 million and $520 million (company guidance).
• The company raised its full-year fiscal 2026 sales outlook to a range of $2.10 billion to $2.17 billion after first-quarter results exceeded the upper end of its prior outlook (company guidance).
• Between July 1, 2025 and September 30, 2025, Kennametal repurchased 474,859 shares for $9.99 million, completing a buyback of 2,966,554 shares for $69.91 million under the February 7, 2024 authorization (company buyback update).

Valuation Changes

• Fair Value Estimate remained unchanged at $25.25 per share, indicating no revision to the intrinsic value assessment.
• The Discount Rate fell slightly from 9.12 percent to 9.09 percent, reflecting a modest decrease in the assumed cost of capital.
• Revenue Growth was effectively unchanged at about 4.71 percent, signaling a stable outlook for top line expansion.
• Net Profit Margin was effectively unchanged at about 6.12 percent, indicating no material shift in long term profitability assumptions.
• Future P/E edged down marginally from 16.94x to 16.93x, suggesting a slightly lower valuation multiple embedded in the model.