Industrial materials and tools company Kennametal (NYSE: KMT) reported Q2 CY2026 results topping the market’s revenue expectations, with sales up 42.6% year on year to $736.6 million. On top of that, next quarter’s revenue guidance ($760 million at the midpoint) was surprisingly good and 14.3% above what analysts were expecting. Its non-GAAP profit of $2.96 per share was 28.4% above analysts’ consensus estimates.

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Company Overview

Involved in manufacturing hard tips of anti-tank projectiles in World War II, Kennametal (NYSE: KMT) is a provider of industrial materials and tools for various sectors.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Kennametal’s sales grew at a tepid 5.1% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Kennametal’s annualized revenue growth of 7.3% over the last two years is above its five-year trend, which is encouraging.

Kennametal also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Kennametal’s organic revenue averaged 7.2% year-on-year growth. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Kennametal reported magnificent year-on-year revenue growth of 42.6%, and its $736.6 million of revenue beat Wall Street’s estimates by 1.3%. Company management is currently guiding for a 52.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 14.8% over the next 12 months, an improvement versus the last two years. This projection is healthy and indicates its newer products and services will spur better top-line performance.

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Operating Margin

Kennametal has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 11.4%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Kennametal’s operating margin rose by 9.2 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q2, Kennametal generated an operating margin profit margin of 41.1%, up 35 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Kennametal’s EPS grew at 34.3% compounded annual growth rate over the last five years, higher than its 5.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Kennametal’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Kennametal’s operating margin expanded by 9.2 percentage points over the last five years. On top of that, its share count shrank by 8.1%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Kennametal, its two-year annual EPS growth of 76.9% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q2, Kennametal reported adjusted EPS of $2.96, up from $0.34 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Kennametal’s full-year EPS to shrink by 15.6% from $4.54 to $3.83.

Key Takeaways from Kennametal’s Q2 Results

We were impressed by Kennametal’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 14.2% to $41.19 immediately following the results.

Sure, Kennametal had a solid quarter, but if we look at the bigger picture, is this stock a buy? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).