This morning, we issued our earnings press release and posted our presentation slides on our website. From there, Pat will cover the quarterly financial results and the fiscal year 2026 outlook, along with an early look at fiscal 2027. In construction, we saw volume growth from strong product performance and the advantage we have as a secure source of tungsten in a tight supply environment. Additionally, we received large orders in our defense business, further securing ongoing growth in this market as we head into fiscal 2027.

In Metal Cutting, we continue to increase our share of wallet with key accounts, especially in aerospace and defense, and build upon our momentum in energy from AI power generation initiatives. As you know, we continue to prioritize above-market growth as a strategic imperative, and these wins position us well in our key end markets. Prices continued their unprecedented increase throughout the quarter, rising from approximately $900 per metric ton to $3,000 as the supply of material continued to be constrained. We are also focused on managing the primary working capital and balance sheet implications of higher tungsten costs.

For example, as competitors are turning away orders or extending lead times, we are well-positioned to capture business that is aligned with our strategic priorities. These new opportunities also facilitate shaping our product portfolio away from lower margin to higher margin solutions. Given those dynamics, we are prioritizing our time and attention on growth opportunities over restructuring initiatives in the near term. Let's move to our quarterly results, which once again exceeded our sales and EPS outlook.

What went well
  • Sales grew 19% organically, a third consecutive quarter of organic growth, exceeding the prior outlook on price and volume in both segments
  • Adjusted EPS increased to $0.77 from $0.47 and adjusted EBITDA margin expanded to 20.8% from 17.9%
  • A $39 million favorable price-versus-raw-material timing benefit drove Infrastructure adjusted operating margin up 680 bps to 18.3%
  • Earthworks grew 43%, energy 28% and aerospace and defense 23% on a constant-currency basis; Americas up 27% and Asia-Pacific up 25%
  • Vertical integration and a secure tungsten supply let Kennametal capture share as competitors turned away orders or extended lead times
  • Raised full-year fiscal 2026 adjusted EPS outlook to $3.75-$4.00 and lifted the fiscal 2027 cost-savings target to about $110 million, $10 million above the Investor Day plan
What went wrong
  • Year-to-date free operating cash flow fell to $18 million from $63 million and operating cash flow to $70 million from $130 million
  • Primary working capital rose to $819 million (32.4% of sales) from $654 million as record tungsten prices and higher tungsten inventory consumed cash
  • The company again did not repurchase shares given tungsten-driven working-capital pressure; a nine-fold rise in tungsten prices was described as unprecedented
  • Management shifted the timeline for previously planned facility-closure restructuring, prioritizing near-term growth over restructuring
  • A prior-year $8 million advanced-manufacturing tax credit did not repeat, an approximately $0.08 EPS headwind
  • Transportation grew only 1% and EMEA rose just 2% on a constant-currency basis, reflecting continued regional softness

More on Kennametal Inc

Reported 2026-05-06 · figures from the Kennametal Inc Q3 2026 earnings call.

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