$CRS earnings report

Carpenter Technology produced a record first quarter, with GAAP operating income of $196.4 million, up 28 percent year-over-year from $153.3 million. Net sales rose to $798.2 million from $733.7 million, while net sales excluding surcharge revenue increased to $634.8 million from $603.1 million. GAAP net income was $162.5 million and diluted earnings per share were $3.25, compared with $122.5 million and $2.43, respectively, in the prior-year first quarter.

Profitability was led by Specialty Alloys Operations. SAO operating income reached $216.3 million versus $170.7 million a year earlier, and adjusted operating margin excluding surcharge revenue increased to 37.7 percent from 32.0 percent. Consolidated adjusted operating margin excluding surcharge revenue was 30.9 percent, compared with 25.4 percent. Management attributed results to productivity improvements, mix management and pricing actions, while noting that planned preventive-maintenance downtime weighed on sequential operating income.

Demand indicators were strongest in commercial aerospace. The Company said aerospace structural and distribution sub-markets posted bookings increases of 23 percent sequentially and 49 percent year-over-year. Aerospace and Defense net sales excluding surcharge revenue were $425.4 million, compared with $388.3 million in the prior-year quarter. Performance was not uniform across end markets: Medical net sales excluding surcharge revenue were $51.7 million versus $61.6 million, and Energy was $32.9 million versus $42.5 million. PEP also reported lower operating income of $7.3 million versus $9.4 million.

Cash conversion was constrained by expansion investment and working capital. Operating cash flow improved to $52.8 million from $39.2 million, but capital expenditures increased to $77.7 million from $42.6 million, resulting in free cash flow of negative $24.8 million versus negative $3.4 million. The Company spent $133.9 million on open-market share repurchases and retained $985.0 million of authorization under its August 2026 $1.0 billion program. Cash was $159.5 million and long-term debt was $691.0 million at quarter end.

Management maintained its FY2027 operating-income outlook of $850 million to $880 million and anticipates Q2 FY2027 operating income of between $192 million to $197 million. The maintained annual outlook follows a first quarter in which operating income was down 5 percent sequentially, but management described commercial-aerospace demand and pricing as strengthening. The primary execution items are sustaining SAO margins, converting bookings into production, and delivering the brownfield expansion while capital spending remains elevated.

Carpenter Technology reported a record first-quarter operating income of $196.4 million, compared with $153.3 million in Q1-26. Net sales were $798.2 million and net sales excluding surcharge revenue were $634.8 million. Gross profit was $256.3 million, while selling, general and administrative expenses declined to $59.9 million from $63.1 million in Q1-26. Net income was $162.5 million and earnings per diluted share were $3.25, compared with $122.5 million and $2.43 per diluted share, respectively, in the prior-year quarter.

SAO was the principal earnings driver. SAO operating income was $216.3 million, up $45.6 million year-over-year, and adjusted operating margin excluding surcharge revenue was 37.7%, compared with 32.0% in Q1-26. Management attributed the improvement to higher productivity, mix management and realized pricing actions. Sequentially, SAO operating income declined from $229.7 million and adjusted margin was slightly below 37.8%, with management citing planned preventive maintenance and lower available effective capacity uptime.

Demand commentary was strongest in Aerospace and Defense. Aerospace & Defense net sales excluding surcharge were $425.4 million, with bookings in aerospace structural and distribution sub-markets up 23% sequentially and 49% year-over-year. The company cited supply-chain confidence in rising production rates and elevated MRO activity, while non-LTA pricing remained strong. In contrast, PEP net sales excluding surcharge were $83.0 million versus $87.2 million in Q1-26, and PEP operating income declined to $7.3 million from $9.4 million amid lower Titanium sales in Medical, partly offset by Additive strength.

Cash generation was weaker in the quarter than operating earnings, with $52.8 million of cash from operating activities and free cash flow of ($24.8 million). Capital expenditures were $77.7 million, including spending on the brownfield expansion. The company reported $658.6 million of total liquidity, including $159.5 million of cash, and Net Debt/EBITDA of 0.6x. It repurchased 241,924 shares for $133.9 million, completed its prior $400.0 million authorization, and authorized a new $1.0 billion repurchase program, while also paying a $0.20 per share quarterly cash dividend.

The outlook calls for SAO Q2-27 operating income of $214 million to $218 million and PEP operating income similar to Q1-27. Management maintained FY27 operating income outlook of $850 million to $880 million and anticipated FY27 free cash flow of $400 million to $430 million. The FY27 guide is framed around continued margin expansion, accelerating demand, pricing support and operating leverage, while Q2 production availability is expected to be affected by holidays. The brownfield capacity expansion is expected to begin contributing in early fiscal year 2028.

Carpenter Technology closed fiscal year 2026 with record fourth-quarter operating income of $206.9 million, up 11 percent sequentially and 37 percent year-over-year. Fourth-quarter net sales were $851.0 million, up 13 percent from $755.6 million, with shipment volume 22 percent higher. Net sales excluding surcharge were $679.7 million, up 9 percent. Net income was $162.4 million and earnings per diluted share were $3.23.

SAO was the central earnings contributor. Segment operating income reached $229.7 million, up 10 percent sequentially and 38 percent year-over-year, while adjusted operating margin reached a record 37.8 percent, compared with 35.6 percent in the previous quarter and 30.5 percent a year ago. The Company attributed the margin expansion to productivity gains, pricing realization across long-term and transactional business, and improved product mix. It also cited mix, realized prices, and operating efficiencies as contributors to consolidated fourth-quarter improvement.

For fiscal year 2026, operating income was $702.0 million and adjusted operating income excluding special items was also $702.0 million, compared with $521.8 million and $525.4 million, respectively, in fiscal year 2025. Fiscal-year net sales were $3,124.2 million and net sales excluding surcharge were $2,527.5 million. The Company highlighted a 15% year-over-year increase in net sales excluding surcharge in Aerospace and Defense.

Cash generation remained substantial for the full year, with $605.0 million of cash provided from operating activities and $362.3 million of adjusted free cash flow. Quarterly cash conversion was lower than the prior-year period: operating cash flow was $240.1 million versus $258.0 million, and adjusted free cash flow was $155.0 million versus $201.3 million. The Company attributed the declines to working capital needs and higher capital expenditures, which were $85.1 million versus $58.0 million and were primarily related to the brownfield expansion.

Capital allocation included $45.2 million of repurchases in the quarter and $179.1 million in fiscal year 2026, with $119.0 million remaining under the $400.0 million authorization. Fiscal year 2027 guidance calls for $850 million to $880 million of operating income, $400 million to $430 million of adjusted free cash flow, and first-quarter operating income of $195 million to $200 million. The Company also established a fiscal year 2029 operating income target of $1.2 billion to $1.3 billion, tied to demand, operating execution, mix and pricing actions, and the brownfield capacity expansion.