Kennametal Inc (KMT) · Nov 4, 2026 · Earnings
Beat — Diluted EPS $3.48 vs ~$2.65 consensus; sales $768.2M vs ~$770.4M
Kennametal’s first-quarter earnings beat consensus and full-year EPS expectations rose, but tungsten-driven inventory investment produced sharply negative cash flow.
Kennametal is an industrial tooling and materials company navigating improving aerospace, defense, energy and transportation demand while absorbing an unprecedented tungsten-price shock; its FY27 plan already assumed elevated pricing, volume growth and severe working-capital pressure.
The quarter beat on earnings, but not on sales. Diluted EPS of $3.48 was well above the published consensus of roughly $2.65, while sales of $768.2 million were essentially flat to slightly below the roughly $770.4 million expectation. The earnings beat was therefore real, but it came overwhelmingly through pricing timing and margin rather than a broad revenue upside. 〔0〕
| Q1 FY27 | Q1 FY26 | Consensus | |
|---|---|---|---|
| Sales (Financial Statements) | $768.2M (+54.3%) | $498.0M | $770.4M |
| Diluted EPS (Income Statement) | $3.48 | $0.30 | $2.65 |
| Operating income (Income Statement) | $379.3M | $37.6M | |
| Operating cash flow (Cash Flow statement) | $(201.3)M | $17.5M | |
| Free operating cash flow (FOCF) | $(211.7)M | $(5.5)M |
The headline profit surge is unusually dependent on tungsten price timing. Operating income jumped to $379 million from $38 million, but approximately $323 million of the increase came from raw-material-related pricing arriving ahead of the associated cost impact. Infrastructure supplied most of the windfall, with $258 million of that benefit, while Metal Cutting added $65 million. That makes the reported margin explosion less representative of steady-state operating performance than the headline numbers suggest.
The business is growing, but the cash conversion is the central weakness. Metal Cutting sales rose 28% with 29% organic growth, while Infrastructure sales nearly doubled, but inventory increased by roughly $508 million from June 30 as Kennametal stocked tungsten and made supplier prepayments. That drove operating cash flow to negative $201 million and FOCF to negative $212 million, versus positive operating cash flow and only modestly negative FOCF a year earlier.
Management raised the earnings tone, but the filing does not quantify the new full-year EPS target. The company said the quarter reinforced confidence in its FY27 sales outlook and higher full-year EPS expectations, while reiterating a longer-term 16% to 19% adjusted EBITDA margin profile under steady-state tungsten prices. That is incrementally better than the pre-quarter setup, but the lack of a revised numerical annual EPS range limits how precisely the upgrade can be measured. The prior setup called for FY27 sales of $3.33 billion to $3.45 billion and adjusted EPS of $4.15 to $5.15.
Bottom line: Kennametal beat the earnings bar and improved its outlook, but the quarter’s exceptional profit was largely a tungsten-pricing timing benefit rather than clean underlying leverage. The business story advances modestly, while the $212 million cash outflow remains the key constraint.
Q2 FY27 earnings report and updated full-year outlook
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