This morning, we issued our earnings press release and posted our presentation slides on our website. I will begin the call today with an overview of the quarter, including end 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. In the quarter, the infrastructure team secured significant mining orders in earthworks from key distributors in Asia-Pacific and EMEA.

In Metal Cutting, we won projects that continued to advance our growth focus on Aerospace and Defense. As you know, we have and will continue to prioritize above-market growth. Now, let's move to our quarterly results, which again exceeded the sales and EPS outlook we provided last quarter. Compared to the outlook, sales were better than expected on higher sales volume, which included the stronger than anticipated effect of customers buying ahead of price increases and modest improvement in certain end markets.

EPS benefited from the volume and a lower than anticipated tax rate. That's our second consecutive quarter of organic growth and reflects price realization, buy-ahead, and continued modest relief from the broad market weakness. In terms of profitability, Adjusted EBITDA margin was 17.1%, compared to 13.9% in the prior year quarter. Adjusted EPS increased to $0.47, compared to $0.25 in the prior year quarter.

What went well
  • Sales rose 10% organically, a second straight quarter of organic growth, exceeding the outlook on higher volume and buy-ahead demand
  • Adjusted EPS increased to $0.47 from $0.25 and adjusted EBITDA margin expanded to 17.1% from 13.9%
  • A favorable $17 million price-versus-raw-material timing benefit in Infrastructure lifted segment adjusted operating margin 370 bps to 12.3%
  • Aerospace and defense grew 23% and earthworks grew 18% on a constant-currency basis; Americas sales rose 16%
  • Raised full-year fiscal 2026 outlook (sales to $2.19-$2.25 billion; adjusted EPS to $2.05-$2.45) and delivered $8 million of restructuring savings
  • Amended and extended the $650 million revolving credit facility to November 2030, maintaining ample liquidity of about $779 million
What went wrong
  • Results included roughly $10 million of pull-forward from customers buying ahead of price increases, which management flagged as a headwind to the third quarter
  • Year-to-date free operating cash flow fell to $38 million from $57 million and operating cash flow to $73 million from $101 million
  • Primary working capital rose $97 million (inventory up $85 million) to $690 million, or 31.9% of sales, on higher tungsten prices
  • The company did not repurchase any shares in the quarter given the working-capital demands of record tungsten prices
  • Some near-term restructuring actions slipped into fiscal 2027, trimming expected fiscal 2026 savings to about $30 million
  • A prior-year ~$3 million insurance benefit did not repeat and EMEA sales rose only 2% on a constant-currency basis

More on Kennametal Inc

Reported 2026-02-04 · figures from the Kennametal Inc Q2 2026 earnings call.

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