Hi
This is a really odd issue. I updated several KVM SL7.3 guests with the latest kernel (3.10.0-693.2.2) with no problems.
On rebooting the host server, all the guests except one came up OK.
The one guest with a problem came up with a grub> prompt and so I tried all the usual commands to locate the root directory on (hd0,1), but it looked like it was pointing at a very old grub directory!!!
I eventually recovered the guest by booting it from an install iso and then rebooting it from the virtio disk. This seemed to help the guest find it's hard drive and it booted up OK.
The last items in the guest log are as follows:

Sep 14 18:43:24 db2 dracut: *** Installing kernel module dependencies and firmware ***
Sep 14 18:43:25 db2 dracut: *** Installing kernel module dependencies and firmware done ***
Sep 14 18:43:25 db2 dracut: *** Resolving executable dependencies ***
Sep 14 18:43:39 db2 dracut: *** Resolving executable dependencies done***
Sep 14 18:43:40 db2 dracut: *** Hardlinking files ***
Sep 14 18:43:40 db2 dracut: *** Hardlinking files done ***
Sep 14 18:43:40 db2 dracut: *** Stripping files ***
Sep 14 18:43:41 db2 dracut: *** Stripping files done ***
Sep 14 18:43:41 db2 dracut: *** Generating early-microcode cpio image contents ***
Sep 14 18:43:41 db2 dracut: *** Constructing AuthenticAMD.bin ****
Sep 14 18:43:41 db2 dracut: *** Store current command line parameters ***
Sep 14 18:43:41 db2 dracut: *** Creating image file ***
Sep 14 18:43:41 db2 dracut: *** Creating microcode section ***
Sep 14 18:43:41 db2 dracut: *** Created microcode section ***
Sep 14 18:44:03 db2 dracut: *** Creating image file done ***
Sep 14 18:44:24 db2 dracut: *** Creating initramfs image file '/boot/initramfs-3.10.0-693.2.2.el7.x86_64.img' done ***

Could this be a dracut issue or a KVM issue?

Cheers
Bill Maidment