Shares in metal cutting and tools company Kennametal (KMT 2.98%) rose by as much as 14.4% by 11 a.m. this morning. The move came after the company released upbeat second-quarter earnings. Here's the lowdown.
Kennametal beat expectations
The company generates 46% of its revenue from the general engineering end market, and then mid-teens percentages from transportation, aerospace & defense, energy, and earthworks, respectively. Given that kind of exposure and the general weakness in the industrial sector, it's understandable if investors might have had low expectations going into the earnings. After all, industrial companies like 3M have given relatively modest guidance for 2026.
NYSE: KMT
Key Data Points
That said, the company's sales and earnings growth came in above management's outlook, with CEO Sanjay Chowbey noting that the 10% year-over-year sales growth in the quarter was "better than expected on higher sales volume" during the earnings call.
As such, this isn't a story of price hikes contributing to unsustainable sales growth. However, pricing did play a role, as Chowbey also noted that customers were buying in ahead of price increases as tungsten prices hit record highs. It's not clear if that level of demand will persist in the coming quarters.
Image source: Getty Images.
Where next for Kennametal
On a more positive note, its aerospace & defense markets can expect to improve in 2026 amid an improved outlook for aircraft production, and the company's energy exposure offers growth opportunities as data centers continue to power electricity demand. Finally, management also noted the recent (January data) pickup in the Institute for Supply Management's (ISM) Purchasing Managers Index, which indicated growth in the U.S. manufacturing sector after 12 months of declines.
While Kennametal's earnings report wasn't quite an affirmation of an inflection point in U.S. manufacturing, it doesn't indicate things are getting worse. Alongside the better ISM data, that's a plus.
