Kennametal balances a breakthrough in additive manufacturing technology with the reality of negative free cash flow and volatile raw material costs, leaving investors divided on the stock's outlook.
Kennametal's record profitability and new KAF82 product are offset by negative cash flow and lower guidance, creating a neutral outlook.
Kennametal reported record fiscal 2026 earnings of $4.57 per share, bolstered by a 43% revenue jump in the fourth quarter. Despite the technical success of its new KAF82 additive manufacturing tungsten carbide, the company faces significant pressure from negative operating cash flow and cooling guidance for fiscal 2027.
KAF82 is a proprietary additive manufacturing tungsten carbide grade that allows Kennametal to control its entire supply chain, offering a technical edge that rivals cannot easily replicate.
The negative cash flow was primarily driven by high working capital requirements, specifically inventory built at peak tungsten prices and advance payments to secure raw material supply.