UPDATE: UBS Downgrades Kennametal (KMT) to Neutral
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UBS analyst Steven Fisher downgraded Kennametal (NYSE: KMT) from Buy to Neutral with a price target of $35.00 (from $36.00).
The analyst comments "We are downgrading KMT to Neutral, from Buy. While we have been pleased with KMT's execution on restructuring and sales strategy, we think the earnings upside potential is going to take longer to achieve than we previously anticipated due to mix challenges and overall market conditions. KMT is nearing a positive inflection in organic growth, but we think that is priced in, and the earnings curve will be flatter due to lower margins. We still expect KMT to earn $1.65 of EPS, but now in FY23 vs. our prior FY22. With the stock up 25% in the last 6 months, and the multiple in-line with historical levels, we think the stock is fairly valued. We see the stock as being range bound. Upside would be driven by a faster than expected rebound in aerospace and oil & gas markets. We will be monitoring airline profitability, airline miles flown, and aircraft production, rig counts, oil production and energy capex. For downside, we will be watching for another decline in oil prices driving a pull-back in rig counts and oil production, and further lock-downs restricting air travel, plus any signs of lower automotive production."
Shares of Kennametal closed at $35.26 yesterday.
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