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Kennametal Q1 Earnings: Can NYSE:KMT Hit Its $0.05 EPS Target?

in EARNINGS/INVESTING IDEAS by

Kennametal Inc. (NYSE:KMT) is scheduled to report Q1 earnings results after markets close for trading on November 2, 2020.

The company is expected to report earnings of $0.05/share on revenue of $384.8 million. The consensus earnings per share (EPS) of $0.05/share is based on a poll of 13 analysts and represents a decline in eps of −68.2% over the same quarter last year, when the company reported earnings of $0.17/share.

The revenue forecast of $384.8 million based on a poll of 10 analysts implies a year-over-year (YoY) decline in revenue of −25.7%. Last year the company reported $518.1 million in revenue for the quarter.

Expected to report EPS contraction of −68.2% for Q1, 2021
Metric Expected Prior Year YoY Change
Revenue $384.83 $518.09 −25.7%
EPS $0.05 $0.17 −68.2%

Earnings Call Trends

Historically, management has exceeded analyst expectations 4 out of the last 8 tracked quarters, missed 3 quarters, and met expectations 1 quarter.

What are your expectations from Kennametal Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q4, 2020 $0.12 $0.15 26.6% Beat
Q3, 2020 $0.29 $0.46 58.6% Beat
Q2, 2020 $0.20 $0.17 −14.0% Missed
Q1, 2020 $0.17 $0.17 0% Met
Q4, 2019 $0.85 $0.84 −1.2% Missed
Q3, 2019 $0.79 $0.77 −3.1% Missed
Q2, 2019 $0.68 $0.71 3.9% Beat
Q1, 2019 $0.65 $0.70 7.0% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −3.5%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 3, 2020 $26.96 $26.02 −3.5% Decline
May 4, 2020 $23.52 $24.22 3.0% Increase
February 3, 2020 $31.29 $29.61 −5.4% Decline
November 4, 2019 $32.71 $33.54 2.5% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.38, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.38 implies a 0.0% chance of earnings manipulation.

Fundamentals And Technical Analysis

Kennametal Inc. is currently trading at $32.84/share, down −4.7% for the day. The company is trading at approximately 84.8% of its 52-week high of $38.73/share. The company’s stock price is up 26.2% since the last earnings report and down −4.0% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 51.47 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:KMT Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −482.92 and a forward P/E multiple of 31.51.

Kennametal Inc.’s current share price also implies a price-to-book (P/B) multiple of 2.22. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q4
Period End Date June 30, 2020
Stock Price (Current) $32.84
P/E Ratio −482.9x
P/E Ratio (Fwd) 31.5x
PEG Ratio 4.9
Total Debt / Total Capital 28.3%
Levered Free Cash Flow -$20.413 million
EV / EBITDA 11.9x

Finbox

Kennametal Inc. is a mid-cap stock with a market capitalization of $2.734 billion and a total enterprise value of $3.311 billion. The company operates in the Industrials sector and the Machinery industry.

Kennametal Inc. develops and applies tungsten carbides, ceramics, and super-hard materials and solutions for use in metal cutting and extreme wear applications to enable customers work against corrosion and high temperatures conditions worldwide. It operates through three segments: Industrial, Widia, and Infrastructure. The company offers standard and custom products, including turning, milling, hole making, tooling systems, and services, as well as specialized wear components and metallurgical powders for manufacturers engaged in various industries, such as the manufacturers of transportation vehicles and components, machine tools, and light and heavy machinery; airframe and aerospace components; and energy-related components for the oil and gas industry, as well as power generation. It also provides specified product design, selection, application, and support services; and standard and custom metal cutting solutions to general engineering, aerospace, energy, and transportation customers. In addition, the company produces compacts, nozzles, frac seats, and custom components used in oil and gas, and petrochemical industries; rod blanks and abrasive water jet nozzles for general industries; earth cutting tools and systems used in underground mining, trenching and foundation drilling, and road milling; tungsten carbide and specialty alloy powders for the oil and gas, aerospace, and process industries; and ceramics used by the packaging industry for metallization of films and papers. It provides its products under the Kennametal, WIDIA, WIDIA Hanita, and WIDIA GTD brands through its direct sales force; a network of independent and national chain distributors; integrated supplier channels; and value added resellers, as well as through the Internet. Kennametal Inc. was founded in 1938 and is based in Pittsburgh, Pennsylvania.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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