Kennametal Beats Estimates, Raises Outlook on Strong Pricing and Energy Sector Wins
LATROBE, Pa. — February 4, 2026 — Kennametal Inc. (NYSE: KMT) delivered a stronger-than-anticipated second quarter, outperforming its own sales and earnings per share guidance, the company announced in its earnings call Wednesday. The results were fueled by strategic project wins, particularly in the burgeoning energy and aerospace sectors, and successful pricing strategies that mitigated the impact of historically high tungsten raw material costs.
CEO Sanjay Chowbey highlighted "significant mining orders" secured by the Infrastructure segment in Asia Pacific and EMEA, alongside project wins in Metal Cutting that advance the company's focus on Aerospace and Defense. CFO Patrick Watson detailed a 10% year-over-year organic sales increase, with adjusted EPS jumping to $0.47 from $0.25 in the prior year period. Adjusted EBITDA margin expanded to 17.1%, up from 13.9% a year ago.
The company directly addressed the elephant in the room: a dramatic surge in tungsten prices, which are up approximately 33% year-to-date. Kennametal implemented mid-single-digit price increases effective January 1 and reported approximately $13 million in sales pulled forward by customers anticipating further hikes. Management expressed confidence in their ability to price for the rising costs through a mix of list prices, indexed contracts, and surcharges.
"Our ability to navigate this raw material environment is a testament to our commercial execution and product value," Chowbey stated. "Even adjusting for the buy-ahead activity, we see a sequential improvement in underlying market volumes."
A significant portion of the call was devoted to the long-term opportunity in power generation. Chowbey framed it as a "multi-decade growth cycle," driven by soaring electricity demand from AI data centers, electric vehicle adoption, and grid expansion. Kennametal's wear-resistant and metal-cutting solutions are integral to building this infrastructure, from gas turbines and backup generators for data centers to trenching for wind farm foundations and transmission lines. The company estimates this "source to generation" vertical represented about 17% of its fiscal 2025 sales.
Based on the strong first half and pricing momentum, Kennametal raised its fiscal 2026 outlook. It now expects sales in the range of $2.19 billion to $2.25 billion and adjusted EPS between $2.05 and $2.45.
Market Analysts Weigh In:
"The pricing power demonstrated here is impressive," said Marcus Thorne, a portfolio manager at Horizon Capital. "In an inflationary cycle, passing through 100% of a 2-3x raw material cost increase is no small feat. It speaks to the strength of their customer relationships and the critical nature of their engineered components. The energy transition narrative they laid out provides a credible long-term growth vector beyond cyclical recoveries."
"Let's not get carried away," countered Diana Ruiz, an independent manufacturing sector analyst. "A huge portion of this earnings beat is a timing arbitrage between when they buy tungsten and when they charge customers. That's not sustainable growth—it's a temporary windfall. What happens when tungsten prices stabilize or fall? The 'buy-ahead' in Q2 simply stole from Q3 volume, which they admit will be negative. This feels like a sugar high, not a balanced diet."
"The operational improvements seem to be gaining traction," noted Ben Carter, a veteran industry consultant. "The $8 million in restructuring savings this quarter and the lean transformation initiatives are starting to flow to the bottom line alongside the price actions. If they can hold these margin gains when raw material pressure eventually eases, the earnings power of the business will be structurally higher. Their diversified sourcing for tungsten, including recycled material and their Bolivian facility, also de-risks the supply chain question."