Goldman Removes Kennametal From Sell List, Upgrades To Neutral

In a report published Wednesday, analysts at Goldman Sachs upgraded

from Sell to Neutral, while removing the company from the Americas Sell List. The price target was raised from $28 to $37. The analysts believe that there now is less of a downside risk to the company's earnings over the next year. "While we continue to see KMT as having exposure to weakened end markets, we believe that weakness is increasingly being discounted by investors. As the company is in the early stages of a turnaround, we believe risk/reward is now more fairly balanced," the analysts said. According to Goldman Sachs, investor sentiment regarding Kennametal has started to become more positive as the market begins to look beyond the weakness in the company's energy segment. Although there still are headwinds, the intense restructuring program, which targets another $135 million in savings, is expected to offer medium-term benefits. "We believe that cost savings initiatives should allow KMT to improve operating profitability and ultimately lift ROIC from the mid-single digit range into the low-teens," Goldman Sachs stated. Although the analysts expect the company to continue to witness order weakness in the infrastructure segment over the next few years, results are likely to improve in the medium term.