It has been about a month since the last earnings report for Kennametal (KMT Quick QuoteKMT - Free Report) . Shares have lost about 1.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Kennametal due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Kennametal Q4 Earnings Beat Estimates, Revenues Down Y/Y

Kennametal reported fourth-quarter fiscal 2024 (ended Jun 30, 2024) adjusted earnings of 49 cents per share, which beat the Zacks Consensus Estimate of 44 cents. The bottom line decreased 3.9% from the year-ago figure.

Revenue Details

Kennametal’s revenues were $543 million, which decreased 1% from the year-ago quarter’s figure. Organic sales declined 1% year over year. Business days had a positive impact of 2%. Currency exchange negatively impacted sales by 2%.Kennametal’s revenues beat the Zacks Consensus Estimate of $540 million.

On a geographical basis, revenues from American operations increased 2% year over year to $274.3 million whereas sales from Europe, the Middle East and Africa region were $162.7 million, down 1% from the year-ago quarter’s reading. Sales from the Asia Pacific belt decreased 1% to $106.2 million.

Kennametal reports results under two business segments, namely Metal Cutting and Infrastructure. Its segmental performance for the fiscal fourth quarter is briefly discussed below:

The Metal Cutting segment’s revenues of $334.5 million decreased 1% year over year. Forex woes had an unfavorable impact of 2% and business days had a positive impact of 1%. The Zacks Consensus Estimate for Metal Cutting’s revenues was pegged at $327 million.

The Infrastructure segment’s revenues totaled $209 million, down 2% year over year. Foreign currency movements had an adverse impact of 1% and business days had a positive impact of 1% year over year. Organic sales declined 2% year over year. The consensus estimate for Infrastructure’s revenues was pegged at $205 million.

Margin Profile

Kennametal’s cost of goods sold decreased 0.7% year over year to $372 million. The gross profit decreased 2.5% year over year to $171.3 million wherein the margin decreased 40 basis points (bps) to 31.5%. Operating expenses were $105.5 million, down 4.1% year over year.

The operating income increased 8.9% year over year to $61 million. Operating margin increased 110 bps year over year to 11.3%. Lower raw material costs and restructuring savings aided the results.

Interest expenses were $6.2 million, down 12% from the year-ago quarter’s figure. The adjusted effective tax rate was 29.3%.

Balance Sheet and Cash Flow

While exiting the fiscal fourth quarter, Kennametal’s cash and cash equivalents were $128 million compared with $106 million reported in fourth-quarter fiscal 2023. Long-term debt was $596 million compared with the $595.2 million reported in the year-ago quarter.

In fiscal 2024, Kennametal generated net cash of $277.1 million in operating activities compared with $257.9 million net cash generated in the previous fiscal year’s quarter. Capital invested in purchasing property, plant and equipment (net of the amount received on disposals) was $107.6 million, up 14% from $94.4 million in the prior fiscal year. Free operating cash flow was $175 million compared with $168.6 million in the previous fiscal year’s period.

Kennametal paid a dividend worth $63.4 million and repurchased shares worth $108 million.

Dividend Update

Kennametal announced that its board of directors approved a quarterly cash dividend of 20 cents per share to its shareholders of record as of Aug 13, 2024. The disbursement will be made on Aug 27.

Guidance

For fiscal 2025 (ending June 2025), the company anticipates sales to be in the range of $2.0-$2.1 billion. Adjusted earnings per share are anticipated to be in the range of $1.30-$1.70. Free operating cash flow is expected to be more than 125% of net income (adjusted).

Capital spending is expected to be approximately $110 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -28.95% due to these changes.

VGM Scores

Currently, Kennametal has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Kennametal has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Kennametal belongs to the Zacks Manufacturing - Tools & Related Products industry. Another stock from the same industry, Stanley Black & Decker (SWK Quick QuoteSWK - Free Report) , has gained 4.2% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.

Stanley Black & Decker reported revenues of $4.02 billion in the last reported quarter, representing a year-over-year change of -3.2%. EPS of $1.09 for the same period compares with -$0.11 a year ago.

Stanley Black & Decker is expected to post earnings of $1.02 per share for the current quarter, representing a year-over-year change of -2.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +4.4%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Stanley Black & Decker. Also, the stock has a VGM Score of A.