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Loop Capital cuts Kennametal shares target amid weak demand forecast

EditorEmilio Ghigini
Published 21/06/2024, 14:38
KMT
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On Friday, Loop Capital adjusted its outlook on Kennametal (NYSE:KMT) shares, a global industrial technology company. The firm's price target was lowered to $22.00 from the previous target of $24.00. Despite the reduction, Loop Capital has maintained a Hold rating on the stock.

The revision in the price target comes in response to a series of negative data points that suggest a lower earnings forecast for the company. Loop Capital now projects Kennametal's fiscal year 2024 earnings per share (EPS) to be $1.43, which is at the lower end of the company's own guidance. This conservative estimate aligns with the anticipation of a challenging first half of the fiscal year, marked by weak demand and an unfavorable tax environment.

Looking further ahead, Loop Capital predicts a decline in earnings for fiscal year 2025, with an EPS forecast of $1.35, which is currently the lowest among Wall Street estimates. The firm cites the potential risk to Kennametal's valuation multiple due to the expected decline in EPS.

The updated financial outlook reflects Loop Capital's caution regarding Kennametal's near-term performance in light of the current demand conditions and tax implications. Despite the lowered price target, the Hold rating suggests that the firm advises investors to maintain their current positions in Kennametal without further buying or selling actions at this time.

In other recent news, Kennametal Inc. has been the subject of several significant developments. The company's production facility in Rogers (NYSE:ROG), Arkansas suffered extensive damage due to a tornado.

Kennametal's incoming President & CEO, Sanjay Chowbey, has expressed the company's commitment to swiftly restore operations at the facility, which is integral to Kennametal's Infrastructure segment.

In the financial sphere, Kennametal reported a 4% decrease in sales during its third-quarter fiscal 2024 earnings call, with a significant 14% decline in the Energy sector. Adjusted EBITDA and EPS also saw reductions, largely due to lower sales volumes and external economic factors. However, the company's full-year sales outlook has been narrowed, with expectations for adjusted EPS to be between $1.40 and $1.55.

Loop Capital recently adjusted Kennametal's price target, raising it to $24 from the previous $23 while maintaining a Hold rating on the stock. This adjustment followed the company's third-quarter results and guidance indicating a seasonal wrap-up to fiscal year 2024. Loop Capital also noted that Kennametal's restructuring program is on track to achieve annual savings of $35 million by year's end.

InvestingPro Insights

As investors consider Loop Capital's revised outlook on Kennametal (NYSE:KMT), it's essential to look at the current financial metrics and analyst expectations that can provide a broader context. According to real-time data from InvestingPro, Kennametal has a market capitalization of $1.86 billion and trades at a price-to-earnings (P/E) ratio of 17.43, with an adjusted P/E ratio of 14.96 for the last twelve months as of Q3 2024. Despite a slight revenue decline of 0.2% during the same period, the company's gross profit margin remains robust at 30.74%.

One InvestingPro Tip highlights Kennametal's high shareholder yield, which is reflected in its dividend yield of 3.39%, a commendable feat considering the company has maintained dividend payments for 54 consecutive years. Additionally, analysts predict Kennametal will be profitable this year, with a basic EPS of $1.36 for the last twelve months as of Q3 2024. This aligns with Loop Capital's more conservative EPS forecast for fiscal year 2024.

Those interested in a deeper analysis will find additional InvestingPro Tips on the company's profile at https://www.investing.com/pro/KMT. For instance, Kennametal's stock price movements are quite volatile, and it is currently trading near its 52-week low, which could be an attractive entry point for some investors. For those looking to access these insights and more, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. In total, there are 7 additional tips available on InvestingPro that can help investors make informed decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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