This morning, we issued our earnings press release and posted our presentation slides on our website. I will begin the call today with a brief review of the fiscal year, followed by an aerospace product spotlight and some end market commentary supporting our fiscal 2027 outlook. Pat will cover the quarterly financial results as well as the fiscal 2027 outlook. For the last several years, we have used a systematic approach to our growth initiatives, which includes identifying the most attractive opportunities and allocating the resources needed to capitalize on them.

We broadened our growth platforms this year through wins tied to AI-powered data centers, defense programs, mining projects, and next-generation vehicle powertrains. In addition to the growth we saw from our own strategic initiatives, we experienced improvements in several of our end markets. The final component of sales growth is price, driven by higher tungsten costs. Full year organic sales increased 19% year-over-year, driven by additional price realization and modest volume.

From an end market perspective for fiscal 2026, all end markets experienced growth on a constant currency basis. For the full year, adjusted EPS increased to $4.57 compared to $1.34 in the prior year. Adjusted EBITDA margin was 26.9% compared to 15.2% in the prior year. As expected, free cash flow was adversely impacted by increased working capital requirements related to tungsten prices.

What went well
  • Fourth-quarter organic sales grew 42% with record adjusted EBITDA and operating margins of 46.8% and 41.5% and a record adjusted EPS of $2.96 versus $0.34
  • Full-year fiscal 2026 organic sales rose 19% and adjusted EPS increased to $4.57 from $1.34, with adjusted EBITDA margin of 26.9% versus 15.2%
  • A $252 million favorable price-versus-raw-material timing benefit and strong volume drove the quarter, with all end markets growing and energy up 101% and earthworks up 76% in Q4
  • Metal cutting outperformed its public peers for a fourth consecutive quarter, extending a four-year favorable trend
  • Extended the debt maturity profile (nearest maturity July 2029; notes now to 2031 and 2036) and added a $500 million term loan, lifting liquidity to about $926 million
  • Highlighted a fast-growing ~$500 million CFRP aerospace cutting-tool opportunity growing ~9% per year, and issued a fiscal 2027 outlook for sales of $3.33-$3.45 billion
What went wrong
  • Full-year free operating cash flow was negative $79 million versus positive $121 million a year earlier, and operating cash flow was negative $4 million, on tungsten-driven working capital
  • Share repurchases stayed paused for most of the year (only $10 million bought back in Q1) as working-capital needs took priority
  • The fiscal 2027 adjusted EPS midpoint of $4.65 is roughly flat versus fiscal 2026's $4.57, as the price-raw timing benefit shrinks to about $0.39 (mostly first-half)
  • Fiscal 2027 carries a 23% year-over-year Bolivia FX headwind after the government ended its preferential exchange program
  • Higher debt from the financing actions adds an estimated $0.25 EPS drag, with interest expense of about $50 million expected in fiscal 2027
  • Transportation remains soft, with global light vehicle production expected to decline about a point in fiscal 2027, and primary working capital is guided to about 45% of sales by fiscal 2027 year-end

More on Kennametal Inc

Reported 2026-08-05 · figures from the Kennametal Inc Q4 2026 earnings call.

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