Kennametal Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next
The second-quarter results for Kennametal Inc. (NYSE:KMT) were released last week, making it a good time to revisit its performance. Revenues were US$495m, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$0.29 were also better than expected, beating analyst predictions by 15%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
See our latest analysis for Kennametal
Taking into account the latest results, Kennametal's eight analysts currently expect revenues in 2024 to be US$2.05b, approximately in line with the last 12 months. Statutory earnings per share are expected to reduce 2.2% to US$1.50 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$2.09b and earnings per share (EPS) of US$1.73 in 2024. The analysts seem to have become more bearish following the latest results. While there were no changes to revenue forecasts, there was a substantial drop in EPS estimates.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$25.13, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Kennametal analyst has a price target of US$35.00 per share, while the most pessimistic values it at US$21.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing that stands out from these estimates is that shrinking revenues are expected to moderate over the period ending 2024 compared to the historical decline of 2.6% per annum over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 3.1% annually. So while a broad number of companies are forecast to grow, unfortunately Kennametal is expected to see its revenue affected worse than other companies in the industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Kennametal. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Kennametal analysts - going out to 2026, and you can see them free on our platform here.
It might also be worth considering whether Kennametal's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
