Kennametal surges on earnings beat, lifts outlook amid tungsten boom
Industrial toolmaker's profit more than doubles, margins expand to 10.5% as customers pre-buy amid rising tungsten prices
Kennametal shares rallied after the industrial toolmaker reported quarterly results that significantly exceeded Wall Street expectations, driven by improving end markets and a favorable pricing environment for tungsten-based products.
The Pennsylvania-based company reported fiscal second-quarter sales of $530 million, beating analyst estimates of $514.7 million and representing a 10 percent increase from the prior year. Adjusted earnings per share reached $0.47, well above the consensus estimate of $0.37 and marking an 89 percent surge year-over-year.
Perhaps most notably, adjusted operating margin expanded to 10.5 percent from 6.9 percent in the prior-year quarter, reflecting the company's progress in improving its cost structure and capturing pricing advantages. Operating income rose 66 percent to $53 million, while adjusted operating income increased 68 percent to $56 million.
"We are pleased with our second quarter results, which exceeded the high end of our sales and adjusted EPS Outlook, driven by volume in the quarter, largely from buy-ahead in response to the tungsten pricing environment and modest improvement in certain end markets," said Sanjay Chowbey, President and CEO, in the earnings announcement.
The company's performance came against a backdrop of strengthening industrial activity. U.S. manufacturing expanded in January for the first time in 12 months, with the Manufacturing PMI reaching 52.6 percent, up from 47.9 percent in December, according to industry data. The broader economy has now experienced 15 consecutive months of expansion.
Kennametal's results were bolstered by favorable timing in its infrastructure segment, where pricing gains outpaced raw material costs by approximately $17 million. The segment reported sales of $198 million, up 8 percent, with operating margin expanding to 12.3 percent from 8.6 percent. The metal cutting segment, the company's larger business unit, posted sales of $331 million, an 11 percent increase, with operating margin improving to 9.6 percent from 6.0 percent.
The company raised its full-year outlook, now projecting sales between $2.19 billion and $2.25 billion, up from previous guidance. Adjusted EPS is expected to range from $2.05 to $2.45 for fiscal 2026. For the third quarter, management anticipates sales of $545 million to $565 million and adjusted EPS of $0.50 to $0.60.
Kennametal also declared a quarterly dividend of $0.20 per share, continuing its shareholder return program.
The strong performance arrives amid a significant rally in tungsten prices, a key input for the company's cutting tools and wear-resistant products. High-grade tungsten concentrate prices have soared as much as 150 percent compared to the previous year, driven by supply constraints from tightening mining quotas in major producing countries and robust demand from defense, aerospace, and electric vehicle sectors.
Analysts had mixed views on the stock heading into earnings, with a "Hold" consensus rating and an average price target of $31.67, according to MarketBeat data. However, several firms had recently upgraded their positions, including Zacks Research and Wall Street Zen, both moving to "strong-buy" ratings in late 2025, while Jefferies upgraded the stock to "Buy" in January 2026. Goldman Sachs maintained a "sell" rating with a $28 target price.
"Looking ahead, we remain focused on driving above market growth, improving our cost structure and shaping a smarter portfolio to deliver long-term value for shareholders," Chowbey said.
The stock closed at $35.76 on Tuesday, near its 52-week high of $35.71 and well above its 52-week low of $16.84. The company has a market capitalization of approximately $2.6 billion.