Kennametal Inc.

Kennametal reported Q4 organic sales growth of 42%, with metal cutting organic sales up 22% and infrastructure up 74%. Adjusted EPS was $2.96 in the quarter versus $0.34 a year ago, and adjusted EBITDA and operating margins were 46.8% and 41.5%, respectively, versus 14.8% and 7.4%. For the full fiscal year, organic sales increased 19%, adjusted EPS was $4.57 versus $1.34, and adjusted EBITDA margin was 26.9% versus 15.2%. Free cash flow was pressured by tungsten-related working capital: cash flow from operating activities was negative $4 million and free operating cash flow was negative $79 million in FY2026. For FY2027, the company expects sales of $3.33 billion to $3.45 billion, adjusted EPS of $4.15 to $5.15, Q1 sales of $745 million to $775 million, and Q1 adjusted EPS of $2.50 to $2.80.

Sanjay Chowbey framed fiscal 2026 as a year of disciplined execution across growth initiatives, lean transformation and cost-out actions. He emphasized share gains, expanding customer wallet share, and wins tied to AI data centers, defense programs, mining and next-generation vehicle powertrains. He also highlighted aerospace and defense as a structural growth engine and described several of the company’s opportunities, especially CFRP tooling, as repeatable and sustainable.

Pat Watson said the quarter benefited from decisive pricing actions tied to unprecedented tungsten cost inflation, plus continued volume improvement in metal cutting. He quantified the margin bridge: Q4 adjusted EBITDA margin of 46.8% and operating margin of 41.5%, with favorable raw material timing versus cost, non-raw-material pricing and tariff surcharges, volume leverage, and about $5 million of restructuring savings, partly offset by compensation, tariffs and inflation. He also said FY2026 free operating cash flow was negative $79 million, net capex was $75 million, shareholder returns totaled $71 million, and quarter-end liquidity was about $926 million including revolver availability and accordion capacity. For FY2027, he guided to $50 million of interest expense, an effective tax rate of about 25%, working capital expenditures of $85 million, and primary working capital of 45% by year-end; the company also plans to draw the $500 million term loan in the September quarter and has extended maturities to 2029, 2031 and 2036.

Analysts focused heavily on how to think about the company’s normalized earnings run rate versus the tungsten-driven price/raw-material timing benefit. Management reiterated that the first half of FY2027 will still benefit from price/raw timing, but that benefit fades by early third quarter, so the cleaner exit rate should be modeled after that. Questions also probed volume assumptions, with management saying FY2027 volume growth is expected to come from both market recovery and 1% to 2% share gain, and that overall volume for the business in Q4 was low single digits, with metal cutting stronger than infrastructure. Another thread was cash flow and capital allocation: Pat said Q1 should see roughly a $200 million cash draw, cash flow should turn positive in the second half, and FY2028 should revert to a normalized cash-generation profile.