Kennametal Inc. KMT has been benefiting from strength in the Infrastructure segment, driven by solid momentum in the aerospace & defense and energy end markets arising from favorable order timing. The segment’s revenues inched up 0.4% year over year in the first quarter of fiscal 2025 (ended September 2024).

The company is also witnessing several positive trends in its key end markets that hold promise for its long-term growth. This includes an increase in U.S. and international defense spending volumes and digitalization.

The company is poised to benefit from its well-diversified portfolio and investments in product development. Some notable products introduced by the company are TopSwiss Inserts, HARVI TE Duo-Lock, KSEM ST Line, Through Coolant ER Collets, FV Geometry Inserts and Chip Fan, etc. Also, it has remained focused on investing in manufacturing facilities to boost growth. For instance, it launched a metal cutting inserts manufacturing facility in Bengaluru, India, which bolstered its capability to cater to the increasing demand for existing and new product lines.

KMT remains focused on rewarding its shareholders through dividend payments and share buybacks. In the first three months of fiscal 2025 (ended September 2024), it paid out dividends worth $15.6 million to its shareholders and repurchased shares for $15 million. Also, in fiscal 2024 (ended June 2024), it distributed dividends worth $63.4 million and repurchased shares worth $65.4 million.

Price Performance of KMT

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In the past three months, this Zacks Rank #3 (Hold) company’s shares have lost 5.4% compared with the industry’s 7.9% decline.

Despite the positives, softness across the transportation end market, owing to lower volumes and project activity, is affecting the  Metal Cutting segment’s revenues. Also, lower economic activity and project timing in the general engineering end market are ailing the segment. Owing to the prevailing softness across its businesses, the company expects revenues to be in the range of $2.0-$2.1 billion for fiscal 2025 (ending June 2025), implying a year-over-year decrease of 1.4% at the midpoint.

Kennametal has been witnessing the impacts of high operating expenses over time. Although the company’s operating expenses were relatively flat year over year in the first quarter of fiscal 2025, it incurred higher compensation expenses. In the fiscal first quarter, its operating margin decreased 130 basis points due to headwinds from higher wages, general inflation and certain manufacturing costs. For fiscal 2025, continued pressures from the high operating expenses and inflationary environment are expected to dent Kennametal’s bottom line.

Key Picks

Some better-ranked companies are discussed below.

Graham Corporation GHM currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

GHM delivered a trailing four-quarter average earnings surprise of 101.9%. In the past 60 days, the Zacks Consensus Estimate for Graham’s fiscal 2025 (ending March 2025) earnings has been stable.

Applied Industrial Technologies AIT presently carries a Zacks Rank #2 (Buy). AIT delivered a trailing four-quarter average earnings surprise of 4.8%.

In the past 60 days, the consensus estimate for its fiscal 2025 earnings has increased 0.2%.

Generac Holdings GNRC presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 10.8%.

In the past 60 days, the consensus estimate for GNRC’s 2024 earnings has increased 1.6%.

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