KMT: Future Returns Will Hinge On Sustaining Tungsten Pricing Power

The analyst price target for Kennametal has increased to a range of $25 to $28, up from $21 to $22 previously. Analysts point to a positive inflection from rising tungsten prices and better than expected Q1 results with improved pricing benefits.

Analyst Commentary

Recent research updates reflect a more constructive but still divided view on Kennametal, with higher price targets acknowledging improving fundamentals while ratings remain mixed. Analysts are weighing stronger near term execution against questions on the durability of growth and margin gains.

Bullish Takeaways

• Bullish analysts highlight a positive inflection in growth as rising tungsten prices support better pricing power and revenue visibility, which in turn justifies higher valuation multiples.
• Stronger than expected Q1 performance, including segment EBIT meaningfully above consensus and a return to organic growth, is viewed as evidence that operational execution is improving.
• The increase in FY26 EPS guidance, driven by improved pricing benefits, supports a more favorable earnings trajectory and helps underpin the raised price target range.
• Early signs of sustained pricing discipline and cost control raise confidence that margin expansion could be more durable than previously assumed, improving the risk reward profile.

Bearish Takeaways

• Bearish analysts maintain cautious ratings despite higher targets, arguing that the stock already discounts much of the near term earnings improvement, which may limit upside from current levels.
• There is concern that the recent organic growth recovery, the first in two years, may prove fragile if end market demand or tungsten pricing normalizes, creating downside risk to out year estimates.
• Some remain unconvinced that management can sustain margin and EPS momentum through FY26, seeing execution risk in delivering on the raised guidance and targeted efficiency gains.
• Uncertainty around the pace and breadth of cyclical recovery in Kennametal's key industrial segments keeps a more constructive re rating case on hold for now.

What's in the News

• Kennametal launched a new integration with Hexagon's cloud-based Tool Library, giving machinists instant access to verified Kennametal digital tooling data in WORKNC CAM to cut setup time and improve machining accuracy, with support planned to expand to more CAM systems and product lines. (Key Developments)
• The company raised its fiscal 2026 guidance and now expects sales between $2.10 billion and $2.17 billion after a stronger than expected first quarter with share gains and better end market conditions. (Key Developments)
• Between July 1 and September 30, 2025, Kennametal repurchased 474,859 shares for $9.99 million, completing a total buyback of 2,966,554 shares, or 3.84 percent of shares, under its February 7, 2024 authorization. (Key Developments)
• Kennametal issued second quarter fiscal 2026 guidance, projecting sales in the range of $500 million to $520 million. (Key Developments)

Valuation Changes

• Fair Value: Unchanged at approximately $25.25 per share, indicating a stable intrinsic value estimate despite revised assumptions.
• Discount Rate: Fallen slightly from about 9.09 percent to 9.05 percent, modestly reducing the implied cost of capital in the valuation model.
• Revenue Growth: Risen slightly from roughly 4.71 percent to 4.82 percent, reflecting a marginally more optimistic outlook for top line expansion.
• Net Profit Margin: Edged down slightly from about 6.12 percent to 6.11 percent, signaling a near steady but fractionally lower long term profitability assumption.
• Future P/E: Declined marginally from around 16.93x to 16.91x, suggesting almost no change in the forward valuation multiple applied to earnings.