Kennametal heads into its May 6 earnings report with short sellers retreating sharply — the most notable positioning shift at this industrial tools maker in months.
Short interest has fallen by roughly a third since mid-March. The SI % of FF dropped from around 5% in late March to 3.3% now — a meaningful reversal in a stock where shorts were meaningfully positioned. The pace accelerated around April 9, when SI fell from 4.7% to 3.7% in a single session. At 3.3%, the current reading marks the lowest level in the 30-day window. The borrow market corroborates that picture: availability is ample, with cost to borrow running around 0.51% — barely above the general-collateral rate. Shares are easy to borrow, and there is no sign of a squeeze dynamic. The ORTEX short score of 33.5 is moderate and has drifted lower over the past two weeks.
Options tell a slightly more cautious story, though not dramatically so. The put/call ratio has climbed to 0.20, above its 20-day average of 0.16 and roughly 1.3 standard deviations elevated. That is a mild uptick in hedging demand — notable given how call-heavy the book has been for most of the year, with the 52-week PCR low at 0.02. The year's PCR high hit 1.27, so the current level is nowhere near peak defensiveness. The direction of travel — from call-dominated to a slightly more balanced book — is consistent with traders adding a modest layer of protection into the print.
The Street picture is one where analysts lifted targets after the February result but stopped short of upgrading their ratings. Morgan Stanley raised its target to $36 and Barclays to $40 in February, both staying at Equal-Weight. UBS moved to $39 (Neutral). The sole outright bull in the recent coverage cycle is Jefferies, which upgraded to Buy with a $40 target in January. JP Morgan, maintaining an Underweight, raised its target to $37. The mean target of around $37.57 sits fractionally below the current price of $38.55, which suggests the Street is broadly fairly valued on the stock. Factor scores are more interesting: EPS momentum ranks in the 95th percentile over 90 days and 79th over 30 days, pointing to a run of positive estimate revisions that may have already catalysed much of the short covering seen this month.
The earnings history reinforces why the covering has been orderly rather than panicked. The February print delivered a 7% one-day gain and a 12.6% five-day gain — a strong reaction that would have squeezed any shorts who stayed in too long. Institutional ownership is concentrated and recently additive: BlackRock and Brandes Investment Partners together hold around 28% of shares, with Brandes adding over 393,000 shares in the March quarter and FMR (Fidelity) adding over 1.8 million. On the insider side, the notable flow over the past 90 days has been net selling — the Chief Administration Officer sold over $1.5 million of stock in February. That selling came at prices around $40, slightly above where the stock trades today, and is worth noting as context rather than signal.
The valuation sits at a PE of around 15.5x and EV/EBITDA of 8.4x — modest multiples that have compressed slightly over the past week. Peer action on the week was mixed: IEX gained nearly 6.7% while IR and GGG fell more than 7% and 7% respectively, with KMT off around 1.1%. The divergence within the industrial machinery group suggests the sector is far from a consensus trade right now. The May 6 print will clarify whether the sharp short-covering of the past month was well-timed conviction — or premature.
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