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How Should Investors React To Kennametal's (NYSE:KMT) CEO Pay?

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Simply Wall St
·3 min read
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This article will reflect on the compensation paid to Chris Rossi who has served as CEO of Kennametal Inc. (NYSE:KMT) since 2017. This analysis will also assess whether Kennametal pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

Check out our latest analysis for Kennametal

How Does Total Compensation For Chris Rossi Compare With Other Companies In The Industry?

According to our data, Kennametal Inc. has a market capitalization of US$2.4b, and paid its CEO total annual compensation worth US$4.8m over the year to June 2020. That's a notable decrease of 11% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$858k.

For comparison, other companies in the same industry with market capitalizations ranging between US$2.0b and US$6.4b had a median total CEO compensation of US$5.9m. This suggests that Kennametal remunerates its CEO largely in line with the industry average. What's more, Chris Rossi holds US$2.7m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component

2020

2019

Proportion (2020)

Salary

US$858k

US$889k

18%

Other

US$3.9m

US$4.5m

82%

Total Compensation

US$4.8m

US$5.4m

100%

Talking in terms of the industry, salary represented approximately 16% of total compensation out of all the companies we analyzed, while other remuneration made up 84% of the pie. Kennametal pays out 18% of remuneration in the form of a salary, significantly higher than the industry average. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
ceo-compensation

Kennametal Inc.'s Growth

Over the last three years, Kennametal Inc. has shrunk its earnings per share by 33% per year. Its revenue is down 23% over the previous year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Kennametal Inc. Been A Good Investment?

With a three year total loss of 31% for the shareholders, Kennametal Inc. would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be lessto generous with CEO compensation.

In Summary...

As we noted earlier, Kennametal pays its CEO in line with similar-sized companies belonging to the same industry. In the meantime, the company has reported declining EPS growth and shareholder returns over the last three years. Considering overall performance, shareholders will likely hold off support for a raise until results improve.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 2 warning signs for Kennametal (of which 1 is a bit concerning!) that you should know about in order to have a holistic understanding of the stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.