Reasons Why You Should Avoid Betting on Kennametal Stock Now

Kennametal Inc. KMT has failed to impress investors with its recent operational performance due to weakness across its businesses and high operational expenses.Based in Pittsburgh, PA, Kennametal is a manufacturer, marketer and distributor of high-speed metal cutting tools, tooling systems and wear-resistant parts. Let’s discuss the factors that continue taking a toll on the firm.Factors Affecting KMTBusiness Weakness: Weakness in both segments remains a concern for Kennametal. The decrease in demand across the transportation end market, owing to lower volumes and project activity, is affecting the Metal Cutting segment’s performance. The segment’s revenues declined 4% year over year in the second quarter of fiscal 2025 (ended December 2024).Also, the lackluster performance of the Infrastructure segment due to weakness in the general engineering end market arising from declines in industrial activity is a reason for concern. There was a particular softness in the earth works end market due to lower customer capital investment and decreasing mining activity. The segment’s organic revenues declined 4% year over year in the fiscal second quarter.Owing to the prevailing softness across its businesses, KMT expects revenues to be in the range of $1.95-$2.0 billion for fiscal 2025 (ending June 2025), implying a year-over-year decrease of 3.5% at the midpoint.KMT Stock’s Price PerformanceImage Source: Zacks Investment ResearchOver the past six months, the Zacks Rank #4 (Sell) company has lost 11.5% compared with the industry’s 5.3% decline.High Costs Expenses: Kennametal has been witnessing the adverse impacts of high operating expenses. The company’s operating expenses increased 1.8% year over year in the second-quarter fiscal 2025. The impact of these costs is evident in the rise of operating expenses as a percentage of total revenues, which increased 100 basis points to reach 22.7%.In the second quarter of fiscal 2025, the Metal Cutting segment’s operating margin decreased 10 basis points due to headwinds from higher wages, general inflation and certain manufacturing costs.Forex Woes: With KMT’s operations spread globally, its business is exposed to risks arising from geopolitical issues, adverse movement in foreign currencies and governmental policies. In the first six months of fiscal 2025, forex woes negatively affected the Metal Cutting segment’s revenues by 1%.Estimate Revisions: In the past 60 days, the Zacks Consensus Estimate for Kennametal’s fiscal 2025 earnings has trended down from $1.44 per share to $1.17 on four downward estimate revisions against none upward. The consensus estimate for fiscal 2026 earnings decreased from $1.60 per share to $1.37 on four downward estimate revisions against none upward.Key PicksSome better-ranked stocks from the same space are discussed below.RBC Bearings Incorporated RBC currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.RBC delivered a trailing four-quarter average earnings surprise of 4.9%. In the past 60 days, the Zacks Consensus Estimate for RBC’s fiscal 2025 earnings has increased 1.2%.Applied Industrial Technologies, Inc. AIT presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 5.3%. The Zacks Consensus Estimate for AIT’s fiscal 2025 (ending June 2025) earnings has improved 1.4% in the past 60 days.The Middleby Corporation MIDD presently carries a Zacks Rank of 2. MIDD delivered a trailing four-quarter average earnings surprise of 1.9%. In the past 60 days, the consensus estimate for MIDD’s 2025 earnings has inched up 0.8%.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report RBC Bearings Incorporated (RBC): Free Stock Analysis Report Applied Industrial Technologies, Inc. (AIT): Free Stock Analysis Report The Middleby Corporation (MIDD): Free Stock Analysis Report Kennametal Inc. (KMT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks