Analyst Downgrades Put Kennametal Back in Focus
Kennametal (KMT) is back on investors’ radar after back to back downgrades from JP Morgan and Morgan Stanley triggered a meaningful one day share price drop and renewed attention on analyst sentiment.
See our latest analysis for Kennametal.
At around $33.74, Kennametal's recent 1 day share price return fell 5.04% on the downgrades, extending a 30 day share price return decline of 7.10%. However, the year to date share price return is up 16.38% and the 1 year total shareholder return stands at 41.20%, suggesting earlier momentum has softened as analysts reassess risk.
If this kind of sharp sentiment shift has you looking wider across industrial and infrastructure themes, it could be a good moment to scan other power grid and electrification beneficiaries with the 33 power grid technology and infrastructure stocks
Kennametal now sits at about a 7% discount to the average analyst target, yet one major broker has moved its own fair value mark below the current price. Is the stock still trading rich or cheap?
Most Popular Narrative: 9.3% Undervalued
The most followed narrative for Kennametal sees fair value at about $37.19 per share, above the last close of $33.74. This frames the recent downgrades against a still constructive long term story.
The company is actively rightsizing capacity and executing structural cost reductions (including plant closures and workforce optimization), which are projected to produce $125 million in run-rate savings by fiscal 2028, supporting significant net margin improvement as volume returns.
Want to see what sits behind that gap to fair value? The narrative leans on compounding revenue growth, higher margins, and a reset earnings multiple. The specific mix may surprise you.
Result: Fair Value of $37.19 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Kennametal still faces pressure if end markets such as Transportation and Oil & Gas stay weak, or if expected cost savings from restructuring fail to materialize.
Find out about the key risks to this Kennametal narrative.
Another View on Kennametal’s Valuation
The earlier narrative framed Kennametal as about 9.3% undervalued using analyst earnings forecasts and a fair value of $37.19 per share. A different lens tells a much tougher story, because the SWS DCF model points to a future cash flow value of $16.61, with the current $33.74 price trading well above that.
This gap between earnings based fair value and the DCF output raises a simple question for investors: do you trust the cash flow math or the earnings trajectory more?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Kennametal for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 46 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
After all of this, does Kennametal look more reassuring or concerning to you right now? Move quickly, review the data on both sides, and weigh the 4 key rewards and 1 important warning sign.
Looking for more investment ideas beyond Kennametal?
If Kennametal has sharpened your interest in fresh opportunities, do not sit on the sidelines while other investors uncover different angles across quality, yield, and resilience.
- Target potential upside by scanning companies that combine quality fundamentals with attractive pricing using the 46 high quality undervalued stocks.
- Lock in income ideas by reviewing stocks that feature reliable payouts in the 8 dividend fortresses.
- Prioritize peace of mind by focusing on steadier companies screened through the 83 resilient stocks with low risk scores.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com