Kennametal (KMT) Poised To Benefit From Solid Prospects

We issued an updated research report on premium machine tools and accessories company, Kennametal Inc. (NYSE:KMT) , on May 25.

On a year-to-date basis, shares of this Zacks Rank #1 (Strong Buy) stock yielded a 24.12% return, outperforming 17.61% growth recorded by the Zacks categorized Machine Tools & Related Products industry.

Existing Scenario

Kennametal reported better-than-expected results (ended Mar 31, 2017) for third-quarter fiscal 2017. The company is keen on developing a sound cost structure by rationalizing certain manufacturing facilities, and lowering costs through employee- and cost-reduction programs. It anticipates that its restructuring programs, including headcount reduction initiatives and some other actions, will yield pre-tax savings of approximately $165–$180 million, by the end of Dec 2018. Of these programs, the company particularly predicts its headcount reduction initiatives to result in estimated annualized savings of $90 million, by Dec 2017. In addition, the other programs are likely to generate savings of $75–$90 million, by Dec 2018.

Furthermore, Kennametal intends to make meaningful acquisitions and dispose non-core assets, in order to manage its portfolio and improve business activities. In fiscal 2016, the company divested certain non-core assets, comprising 18 facilities, which included 11 manufacturing and seven small facilities from castings, steel-plate fabrication and deburring operations. This move will enable the company to better align its business portfolio with the current market demands, over the long term. Additionally, Kennametal remains committed toward rewarding its shareholders through share repurchases and dividend payments.

For fiscal 2017, the company increased its adjusted earnings guidance to $1.50–$1.60 per share from the previous forecast of $1.20–$1.50.

Over the last 60 days, the Zacks Consensus Estimate for the stock moved north for fiscal 2018, reflecting positive market sentiments toward the stock.

Other Key Picks

Some other top-ranked stocks in the industry are listed below:

Caterpillar Inc (NYSE:CAT) generated an average positive earnings surprise of 40.25% over the trailing four quarters and currently boasts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Industrial Technologies, Inc. (NYSE:AIT) , which sports a Zacks Rank #1 at present, pulled off an average positive earnings surprise of 9.78% in the last four quarters.

Acco Brands Corporation (NYSE:ACCO) currently carries a Zacks Rank #2 (Buy) and has an average positive earnings surprise of 79.74% for the past four quarters.

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