Why Is Kennametal (KMT) Down 5% Since Last Earnings Report?

It has been about a month since the last earnings report for Kennametal (KMT). Shares have lost about 5% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Kennametal due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers. Kennametal’s Q1 Earnings Surpass Estimates, Revenues Decline Y/YKennametal reported first-quarter fiscal 2025 (ended Sept. 30, 2024) adjusted earnings of 29 cents per share, which beat the Zacks Consensus Estimate of 25 cents. The bottom line decreased 29.3% from the year-ago figure.Kennametal’s Revenue DetailsKennametal’s revenues were $481.9 million, which decreased 2% from the year-ago quarter’s figure. Organic sales declined 2% year over year. Business days had a positive impact of 1%. Currency exchange negatively affected sales by 1%.Kennametal’s revenues beat the Zacks Consensus Estimate of $581 million.On a geographical basis, revenues from American operations decreased 2% year over year to $237.7 million, whereas sales from Europe, the Middle East and Africa region were $145.9 million, down 1% from the year-ago quarter’s reading. Sales from the Asia Pacific belt increased 2% to $98.3 million.Kennametal reports results under two business segments, namely Metal Cutting and Infrastructure. Its segmental performance for the fiscal first quarter is briefly discussed below:The Metal Cutting segment’s revenues of $297 million decreased 4% year over year. Organic revenues declined 4%. Forex woes had an unfavorable impact of 2%, while business days had a positive impact of 2%. The Zacks Consensus Estimate for Metal Cutting’s revenues was pegged at $301 million.The Infrastructure segment’s revenues totaled $185 million, up 0.4% year over year. Organic revenues increased 1%, while business days had a negative impact of 1% year over year. The consensus estimate for Infrastructure’s revenues was pegged at $180 million.Kennametal’s Margin ProfileKennametal’s cost of goods sold increased 0.4% year over year to $330.9 million. The gross profit decreased 7% year over year to $151 million, while the margin decreased 180 basis points (bps) to 31.3%. Operating expenses were $112 million, flat year over year.The operating income decreased 25% year over year to $37 million. Operating margin decreased 130 bps year over year to 7.6%. Lower sales and production volumes within the Metal Cutting segment, higher wages and general inflation and certain manufacturing costs within the Infrastructure segment ailed the results.Interest expenses were $6.3 million, down 12% from the year-ago quarter’s figure. The adjusted effective tax rate was 4.4%.Kennametal’s Balance Sheet and Cash FlowWhile exiting the fiscal first quarter, Kennametal’s cash and cash equivalents were $119.6 million compared with $128 million in fourth-quarter fiscal 2024. Long-term debt was $596.2 million compared with the $596 million in the year-ago quarter.In the first three months of fiscal 2025, Kennametal generated net cash of $45.7 million in operating activities compared with $25.7 million in the previous fiscal year’s quarter. Capital invested in purchasing property, plant and equipment (net of the amount received on disposals) was $24.7 million, down 22.2% from $31.8 million in the prior fiscal year. Free operating cash flow was $21.1 million against $3 million cash out flow in the previous fiscal year’s period.Kennametal paid a dividend of $15.6 million and repurchased shares worth $15 million.Kennametal’s GuidanceFor fiscal 2025 (ending June 2025), the company anticipates sales to be in the range of $2.0-$2.1 billion. Adjusted earnings per share are anticipated to be in the range of $1.30-$1.70. Free operating cash flow is expected to be more than 125% of net income (adjusted).Capital spending is expected to be approximately $110 million.How Have Estimates Been Moving Since Then?It turns out, estimates review flatlined during the past month.VGM ScoresCurrently, Kennametal has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookKennametal has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>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 Kennametal Inc. (KMT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks