Kennametal earnings jolt investor attention

Kennametal (KMT) is back in focus after quarterly revenue rose 21.8% year over year and net profit climbed 84.96%, with both figures surpassing analyst expectations and leading growth among professional tools peers.

At a share price of $36.32, Kennametal has seen its 1-year total shareholder return of 70.84% outpace its 6.45% 3 month share price return. This suggests stronger performance over the longer term, while recent momentum is more measured as investors weigh the latest earnings, insider selling and mixed technical signals.

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With Kennametal stock now close to analyst targets after a strong quarter, the key question is whether the recent gains leave limited upside or whether the latest results suggest the market is still underestimating its prospects.

Most Popular Narrative: 2% Undervalued

At $36.32, Kennametal is trading slightly below the most followed narrative fair value estimate of $37.19. That estimate is built on detailed revenue, margin and earnings assumptions.

The company is actively rightsizing capacity and executing structural cost reductions (including plant closures and workforce optimization), which are projected to produce $125 million in run-rate savings by fiscal 2028, supporting significant net margin improvement as volume returns.

Investors may be curious about the revenue lift and margin profile that underpin the modest 2% gap to fair value. The narrative relies on specific growth rates, profitability gains and a future earnings multiple that is lower than many peers. It can be helpful to examine which financial levers contribute most to that $37.19 fair value calculation.

Result: Fair Value of $37.19 (UNDERVALUED)

However, Kennametal’s story could look different if weakness in key end markets persists or if expected cost savings from plant closures and restructuring fail to materialize.

Another View: Kennametal and the DCF Check

While the analyst narrative points to Kennametal looking around 2% undervalued against a $37.19 fair value estimate, the Simply Wall St DCF model paints a different picture. On that measure, Kennametal at $36.32 sits well above an estimated future cash flow value of $23.29, which screens as overvalued.

Both approaches rest on their own sets of assumptions. The real question for you is which inputs feel more realistic: the cash flow path in the DCF or the earnings and multiples in the consensus model.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Kennametal for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 45 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With Kennametal’s mixed signals on valuation and future execution, the balance of optimism and caution is clear. Review the underlying assumptions and act quickly to form your own judgment using the 4 key rewards and 1 important warning sign

Looking for more ideas beyond Kennametal?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.