Kennametal Inc. Q1 FY2026 earnings call

• Global commercial teams advanced strategic growth initiatives with project wins in Infrastructure (2 large project wins in Earthworks) and Metal Cutting (projects in Energy, Aerospace and Defense, Transportation).
• Implemented pricing actions in response to rising tungsten costs and realized $8 million in restructuring savings this quarter, executing plans to lower structural costs.
• End market update: Transportation IHS estimates slightly improved, Aerospace and Defense expectations improving, Power Generation as an emerging opportunity with growth in renewable and traditional energy sources for data centers.

Metal Cutting: Reported sales were up 5% compared to the prior year quarter with 3% organic growth and favorable foreign currency exchange of 2%. Adjusted operating margin was 8%, decreasing 20 basis points year-over-year. Infrastructure: Sales increased 3% organically with reported sales growth of 1%, negatively affected 3 points from divestiture. Adjusted operating margin increased 190 basis points year-over-year to 8.8%.

• Raised FY '26 sales to between $2.1 billion and $2.17 billion, volume from negative 1% to positive 3%, net price and tariff surcharge combined ~7%, 2% tailwind from foreign exchange. Adjusted EPS range $1.35 to $1.65. Adjusted tax rate for the year now 27%.
• Q2 sales expected between $500 million and $520 million, volume from negative 4% to flat, price and tariff surcharge realization ~7%, 2% positive impact from foreign exchange. Adjusted EPS range $0.30 to $0.40.

• Risks related to trade and monetary policies, raw material prices (e.g., tungsten costs) which could impact pricing and margins. Tariff landscape is dynamic and requires ongoing actions to offset impacts.

Q: Could you clarify the material uplift in end market outlook and regional mix driving it?

A: APT and surcharge helping, share wins, and modest improvement in some end markets like Aerospace and Transportation with Americas showing strength in Transportation and build rates easing in Aerospace.

Q: How much of the $250 million TAM for engines is volume vs pricing and share gain?

A: The $250 million TAM for Power Generation includes historical trends and growth projection at 10% rate, but specific share gain details not disclosed.

Q: Thoughts on tungsten price impact on top line and margin in Q2 and beyond?

A: Modest tailwind in Q1, Q2 to see ramp-up, Q3 expected to be strongest EPS quarter if tungsten prices stay, with price/raw lagging market by about 2 quarters.

Q: Incremental machining opportunity from data center in Power Generation?

A: Built into the $250 million TAM, with over $100 million in recent years and 10% CAGR projection.

Q: EPS guide change and moving parts?

A: Main changes from volume and price, with ~$0.20 to $0.30 price/cost tailwind this year, tax rate change contributing ~$0.03, and Q4 expected to be price/raw neutral unless tungsten changes.