Machinery company Kennametal Inc. KMT impressed investors with better-than-expected results for third-quarter fiscal 2016 (ended Mar 31, 2016). The company’s adjusted earnings of 37 cents per share exceeded the Zacks Consensus Estimate of 24 cents by 54.2%. However, the bottom-line declined 19.6% from the year-ago tally of 46 cents.Kennametal Inc. - Earnings Surprise | FindTheBest Kennametal's adjusted results excluded roughly 18 cents per share of restructuring and related charges, 2 cents of tax-adjustments for prior asset impairments and roughly 3 cents per share of divestiture-related losses.Talking about Kennametal’s top-line results, net sales of $497.8 million surpassed the Zacks Consensus Estimate of $483 million. On a year-over-year basis, the top-line decreased 22.1%. The year-over-year fall was triggered by tough operating conditions in the end markets, which resulted in an 8% decline in organic revenues. Also, a 4% adverse impact from foreign currency translation and 10% divestiture-related losses hurt the top line.On a geographical basis, Kennametal generated sales of $232.2 million from its North American operations, decreasing 23% year over year. Business in Western Europe remained weak, with revenues of $130.9 million, declining 27.3% year over year. Revenues sourced from Rest of the World fell 14.4% year over year to $134.7 million.Segmental DetailsKennametal reports its revenues under two heads/segments. The company’s segmental performance is briefly discussed below:The Industrial segment’s net sales in the quarter were $316.4 million, down 10.8% year over year. The decline was due to a 5% fall in organic revenues, 1% adverse impact from divestiture and 5% negative impact from foreign currency translation.Organic sales in energy, general engineering, transportation, and aerospace & defense end markets declined. On a geographical basis, revenues fell 8% in Asia, 6% in the Americas and 2% in Europe.The Infrastructure segment’s revenue totaled $181.5 million, down 36.1% year over year. The decline was due to a 12% fall in organic revenues, 21% adverse impact from divestiture and 3% negative impact from foreign currency translation.Organic revenues declined due to weak sales in oil & gas, mining, industrial applications and processing end markets. Geographically, revenues fell 23%, 11% and remained flat in the Americas, Asia and Europe, respectively. MarginsIn the quarter, Kennametal’s adjusted cost of goods sold decreased 22.8% year over year, representing 68.1% of total revenue compared with 68.7% in the year-ago quarter. Adjusted gross margin improved 60 basis points (bps) to 31.9%.Adjusted operating expense, as a percentage of total revenue, was 23.2%, up 170 bps year over year. Adjusted operating margin fell 100 bps year over year to 7.8%.Balance Sheet and Cash FlowExiting third-quarter fiscal 2016, Kennametal’s cash and cash equivalents were $136.6 million, down 1.8% from $139 million at the previous quarter-end. Long-term debt and capital leases were roughly flat sequentially at $700 million.In the first-nine months of fiscal 2016, Kennametal generated net cash of $145.4 million from its operating activities, down from $219.6 million recorded in the year-ago period. Capital spending was $83.3 million compared with $77.6 million spent in first-half fiscal 2015. Free operating cash flow declined 53.1% year over year to $67.2 million.Concurrent with the earnings release, Kennametal announced that its board of directors has approved a quarterly cash dividend of 20 cents per share, payable on May 27 to shareholders of record as on May 13.OutlookFor fiscal 2016, Kennametal projects a 20−22% decline in revenues compared with the previous expectation of 20−23%. Organic revenue is now predicted to drop 10−12%, better than a 10−13% fall estimated earlier.Adjusted earnings are expected within $1.05−$1.15 per share, up from 85 cents to $1.05 per share projected earlier.Cash flow from operating activities is projected in a range of $225−$245 million (versus the previous expectation of $215−$245 million), while capital spending is anticipated within approximately $125−$135 million (retained). Free cash flow will likely come in a band of $100−$110 million (versus the previous projection of $90−$110 million).Also, according to Kennametal, Phase 1 of its restructuring activities has been witnessing sufficient progress, having recorded pre-tax savings of $62 million so far. Once fully implemented, these initiatives will lead to annual pre-tax savings in the range of $40−$45 million, while associated charges will be approximately $60 million. Expected completion date is Jun 30, 2016.The second phase of Kennametal’s restructuring activities is expected to be completed by the end of calendar year 2018. Charges are estimated within $90−$100 million, while annualized savings are predicted in a range of $40−$50 million. So far, the company has incurred $42 million in pre-tax charges, while realizing $32 million of savings.The third phase of Kennametal’s restructuring activities is expected to be completed by Mar 2017. Estimated charges are $40−$45 million, while annualized savings are predicted in a range of $25−$30 million. So far, the company has incurred $15 million in pre-tax charges, while realizing $3 million of savings.With a market capitalization of $1.9 billion, Kennametal currently carries a Zacks Rank #2 (Buy). Other stocks worth considering in the machinery industry include Gorman-Rupp Co. GRC, Luxfer Holdings PLC LXFR and Sandvik AB SDVKY. While both Gorman-Rupp and Luxfer Holdings sport a Zacks Rank #1 (Strong Buy), Sandvik AB carries a Zacks Rank #2 (Buy).Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report KENNAMETAL INC (KMT): Free Stock Analysis Report SANDVIK AB (SDVKY): Free Stock Analysis Report GORMAN RUPP CO (GRC): Free Stock Analysis Report LUXFER HOLDINGS (LXFR): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research