Kennametal (KMT) shares jumped 8.3% recently, closing at $33.28, with higher trading volume. In the last four weeks, the stock has risen 5.5%. This increase is driven by positive news in aerospace and defense, energy, and engineering sectors. The company is seeing benefits from rising aerospace production in the Americas, easing supply chain problems, and strong defense spending. The energy market is also doing well, and general engineering is showing signs of recovery. Kennametal expects to report quarterly earnings of $0.35 per share, a 40% increase from last year, with revenues projected at $509.48 million, up 5.7% from a year ago. Research indicates that changes in earnings estimates often correlate with stock price changes. For Kennametal, the consensus EPS estimate has gone up by 3.4% in the past month. This positive shift in earnings estimates could push KMT prices higher. Kennametal is part of the Zacks Manufacturing – Tools & Related Products industry, which also includes Stanley Black & Decker (SWK). SWK’s shares increased by 0.6% to $82.9 in the last session and are up 11.1% over the past month. Its EPS estimate for the next report has risen by 3.6%, but this is still a 14.8% drop from last year. The recent 8.3% increase in Kennametal stock, along with strong trading volume, suggests it may continue to rise. This indicates we should consider bullish options strategies in the upcoming weeks. The momentum seems based on solid fundamentals, not just short-term sentiments. This rally is supported by genuine strength in the aerospace and defense markets, which have been growing since late 2025. Recent data from the Aerospace Industries Association showed a 4% rise in new commercial aircraft orders for the fourth quarter of 2025. This aligns with improved supply chain conditions and robust defense spending. With the upcoming earnings report predicting a 40% year-over-year increase in earnings per share, we can expect implied volatility to increase. This presents an opportunity to sell out-of-the-money put spreads for added profit, taking advantage of the positive earnings revisions. We are also observing strong demand in the energy markets, which have stabilized after a bumpy 2025. For those looking for a potential earnings beat, buying call options that expire after the announcement could be worthwhile. The 3.4% upward revision in the consensus earnings estimate over the past month is a strong indicator of price appreciation. We’ve seen similar trends in several industrial stocks last year. On the other hand, Stanley Black & Decker shows weaker fundamentals, making it an interesting target for pairs trading. This strategy would involve being bullish on Kennametal while taking a bearish stance on Stanley Black & Decker. Stanley Black & Decker is anticipated to report a 14.8% decline in year-over-year earnings, which raises concerns. Its ties to consumer and construction markets could be a risk, especially as housing start data from December 2025 shows a slight downturn. Therefore, purchasing put options on SWK could provide a useful hedge against our KMT position.

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