Kennametal’s Financial Outlook: Sell Rating Amid Temporary Gains and Tariff Challenges

In a report released today, Michael Feniger from Bank of America Securities maintained a Sell rating on Kennametal (KMT – Research Report), with a price target of $20.00.

Michael Feniger has given his Sell rating due to a combination of factors impacting Kennametal’s financial outlook. Despite reporting better-than-expected third-quarter earnings, part of this performance was attributed to temporary benefits from tax credits and the Inflation Reduction Act, rather than sustainable operational improvements. While there was some progress in metal cutting margins and infrastructure pricing, the overall market demand remains weak, with only the aerospace sector showing positive signs.
Additionally, tariff-related challenges pose significant headwinds for Kennametal. The company faces an $80 million annual tariff cost exposure, with half of this related to China. Although Kennametal is attempting to mitigate these costs through price surcharges and operational adjustments, the uncertainty surrounding tariffs, particularly their impact on industrial production and the automotive market, remains a concern. Given these factors, Feniger maintains a cautious outlook, reiterating an Underperform rating with a price objective of $20, as the potential for upside appears limited in the current macroeconomic environment.