Kennametal: Transitory Tungsten Tailwinds and Earnings Uncertainty Drive Underperform (Sell) Rating

In a report released yesterday, Michael Feniger from Bank of America Securities reiterated a Sell rating on Kennametal, with a price target of $28.50.

Michael Feniger has given his Sell rating due to a combination of factors tied to the quality and durability of Kennametal’s current earnings strength. While the company posted a notably strong fiscal Q2 with double‑digit organic growth and earnings well above expectations, a significant portion of this outperformance stems from customers accelerating purchases ahead of price hikes and from a favorable but temporary timing gap between tungsten input costs and selling prices. Feniger highlights that this tungsten-related benefit is expected to add materially to EPS through FY2026, yet he views this as a cyclical tailwind that can reverse if raw material prices move differently than anticipated, making it an unreliable driver for long‑term valuation.

At the same time, although underlying volumes are gradually improving across key end markets such as aerospace, earthworks, transportation, and general engineering, Feniger is reluctant to project today’s momentum into 2027 given the uncertain macro backdrop and the potential normalization of the tungsten benefit. His price objective of $28.50, based on an unchanged multiple of roughly 7x expected 2026 EBITDA, sits well below the current share price, implying downside risk from present levels. Taken together, the reliance on transitory tailwinds, limited visibility into earnings sustainability beyond 2026, and a valuation that already discounts much of the near‑term upside lead him to reiterate an Underperform (Sell) recommendation on Kennametal’s stock.

Feniger covers the Industrials sector, focusing on stocks such as Caterpillar, Paccar, and CNH Industrial. According to TipRanks, Feniger has an average return of 11.6% and a 65.08% success rate on recommended stocks.

In another report released on January 27, Goldman Sachs also maintained a Sell rating on the stock with a $28.00 price target.