On Friday, BofA Securities adjusted its stance on Kennametal (NYSE:KMT) stock, moving the rating from Neutral to Underperform. The firm also set a price target of $26.00 for the shares. The downgrade comes as Kennametal's share price nears the price objective amid growing concerns over near-term earnings per share (EPS) risks.
According to BofA Securities, Kennametal's financial forecasts for fiscal year 2025 are now on the lower end of the company's guidance, with projections sitting 7% below consensus. The firm pointed out that while there has been some stabilization in the general industrial sector and destocking impacts, increasing pressure is anticipated in the aerospace, transportation, and energy sectors. These pressures may lead to a heavier reliance on the latter part of FY25 for earnings.
Kennametal's operational leverage and EPS potential are significantly dependent on a rebound in volume. Even though there are indications of a potential improvement in the short cycle by 2025, BofA Securities suggests investors might be better positioned by focusing on companies with a Buy rating, such as ESAB.
The analyst's commentary highlights the challenges Kennametal may face, particularly with its EPS, as it contends with sector-specific headwinds. Despite some signs of recovery, the analyst's outlook suggests caution due to the uneven distribution of expected earnings, with a greater emphasis on performance in the later stages of the fiscal year.
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