This morning, we issued our earnings press release and posted our presentation slides on our website. I'll begin the call today with a brief overview of the quarter, including some in-market commentary, followed by a spotlight on one of our growth focus areas, power generation. From there, Pat will cover the quarterly financial results as well as the fiscal year 2026 outlook. As you know, we continue to prioritize above-market growth, and these wins position us well in markets that are benefiting from long-term secular growth trends.

Now, let's move to our quarterly results, which exceeded the sales and EPS outlook we provided last quarter. Compared to the outlook, sales were primarily driven by better-than-expected volume across all end markets. That's our first quarter of organic growth in two years, and reflects modest relief from the broad market weakness that has impacted our end markets for the past eight quarters. Adjusted EPS increased to $0.34 compared to $0.29 in the prior year quarter.

In terms of profitability, adjusted EBITDA margin was 15.3% compared to 14.3% in the prior year quarter. Free operating cash flow year to date was -$5 million compared to $21 million in the prior year. As a reminder, our full year outlook reflects forecasts of specific market drivers and general market conditions. Secondly, for aerospace and defense, expectations are improving as the aerospace industry has recovered from supply chain challenges and will benefit from the recent approval that will increase OEM production.

What went well
  • Sales grew 3% organically, the first quarter of organic growth in two years, and exceeded the prior outlook on better-than-expected volume across all end markets
  • Adjusted EPS increased to $0.34 from $0.29 a year earlier, aided by higher volume and a lower-than-anticipated tax rate
  • Adjusted EBITDA margin expanded to 15.3% from 14.3%, driven by price and tariff surcharges and $8 million of incremental restructuring savings
  • Aerospace and defense grew 20% on a constant-currency basis, with earthworks up 5% and continued data-center power-generation wins in metal cutting and infrastructure
  • Infrastructure secured two large earthworks project wins and metal cutting won projects in energy, aerospace/defense and transportation
  • Returned $25 million to shareholders ($10 million of buybacks and $15 million of dividends) and raised the full-year fiscal 2026 sales and EPS outlook
What went wrong
  • Year-to-date cash flow from operating activities fell to $17 million from $46 million, and free operating cash flow was negative $5 million versus positive $21 million a year earlier
  • Rising tungsten prices drove higher inventory investment, pushing primary working capital to $660 million (32% of sales)
  • Transportation sales declined 1% and general engineering was flat year-over-year, while Asia-Pacific sales dipped 1%
  • A prior-year $4 million net insurance benefit (Rogers tornado) did not repeat, a roughly $0.04 EPS headwind
  • Tungsten costs rose to historically high levels beginning in August, requiring further pricing actions to offset

More on Kennametal Inc

Reported 2025-11-05 · figures from the Kennametal Inc Q1 2026 earnings call.

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