CRS

Shares of Carpenter Technology Corporation CRS gained 7% since reporting adjusted earnings of $3.23 per share for the fourth quarter of fiscal 2026 on July 30, beating the Zacks Consensus Estimate of $3.03 by 6.6%. Earnings rose 46.2% from $2.21 in the year-ago quarter.Net revenues increased 12.6% year over year to $851 million and topped the consensus estimate of $848 million by 0.4%. The upside reflected 22% higher shipment volume, stronger product mix, pricing realization and improved operating efficiency. Carpenter Technology Corporation price-consensus-eps-surprise-chart | Carpenter Technology Corporation Quote Aerospace and Defense remained the largest end market. CRS witnessed a year-over-year revenue increase of 17% in the Aerospace and Defense end-use market. Revenues in the Industrial and Consumer market rose 22%, while Transportation revenues increased 3%. The Medical end-use market’s revenues declined 30% and Energy revenues fell 12%. The cost of goods sold in the fourth quarter of fiscal 2026 increased 7.5% year over year to $582 million. Gross profit rose 25.7% to $269 million. The gross margin came in at 31.6% compared with 28.3% in the prior-year quarter.Adjusted operating income in the reported quarter was a record $207 million compared with $151.4 million in the year-ago quarter. The adjusted operating margin was 30.4% compared with 24.3% a year earlier. The Specialty Alloys Operations segment reported sales of $770.5 million compared with $674.1 million in the prior-year quarter. We predicted the segment’s sales to be $751 million. The upside was driven by productivity gains, pricing across long-term and transactional business, and improved mix. The segment sold 57,454 thousand pounds compared with 46,872 thousand pounds a year ago. The reported figure surpassed our estimate of 50,123 pounds. The segment posted an operating profit of $229.7 million, up 37.5% from $167 million in the year-ago quarter. Our estimate for the segment’s operating profit was $167 million.The Performance Engineered Products segment’s net sales increased 3.7% year over year to $108.5 million. The reported figure beat our estimate of $106 million. The segment sold 3,256 thousand pounds compared with 2,674 thousand pounds in the prior-year quarter. It was lower than our projection of 2,697 thousand pounds. It reported an operating profit of $7.1 million, down 39.3% from $11.7 million a year earlier, showing that higher volume did not translate into stronger segment profitability. Our estimate for the segment’s operating profit was $11.7 million. Carpenter Technology ended fiscal 2026 with cash and cash equivalents of $393 million compared with $315.5 million at the end of fiscal 2025. Long-term debt was $691 million at the end of fiscal 2026 compared with $695 million a year earlier. Cash flow from operating activities was $240 million in the quarter under review compared with $258 million in the prior-year quarter. The company reported adjusted earnings of $10.52 per share in fiscal 2026, missing the Zacks Consensus Estimate of $10.58. The company posted adjusted earnings of $7.42 in fiscal 2025.CRS revenues were $3.12 billion in fiscal 2026, down from $2.88 billion in the year-ago quarter. The top line came in line with the Zacks Consensus Estimate. For fiscal 2027, CRS expects operating income of $850-$880 million, indicating growth of 21-25% from that reported in fiscal 2026. The adjusted free cash flow is projected at $400-$430 million.For the first quarter of fiscal 2027, the company anticipates operating income of $195-$200 million. CRS also set a fiscal 2029 operating income target of $1.2-$1.3 billion, supported by demand, productivity, mix, pricing and expected contributions from its brownfield expansion. CRS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Shares of the company have surged 121.7% in the past year compared with the industry’s growth of 96.8%. Image Source: Zacks Investment Research Commercial Metals Company CMC reported adjusted earnings per share of $1.73 in third-quarter fiscal 2026 (ended May 31, 2026), beating the Zacks Consensus Estimate of $1.60 by 8.1%. The bottom line surged 147.1% from 70 cents in the year-ago quarter. Commercial Metals’ revenues in the reported quarter were $2.48 billion compared with $2.02 billion in the year-ago quarter. The reported figure beat the Zacks Consensus Estimate of $2.37 billion. Metallus Inc. MTUS delivered second-quarter 2026earnings of 26 cents per share, in line with the Zacks Consensus Estimate. Metallus posted earnings of 2 cents in the year-ago quarter.Metallus posted revenues of $341 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate of $331 million. The company posted $305 million in the second quarter of 2025.NWPX Infrastructure, Inc. NWPX came out with second quarter 2026 earnings of $1.62 per share, beating the Zacks Consensus Estimate of $1.33. The company posted earnings of 91 cents a year ago. NWPX Infrastructure posted revenues of $159.5 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate of $155 million. The top line increased from the year-ago quarter’s $133 million. 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 Carpenter Technology Corporation (CRS) : Free Stock Analysis Report Commercial Metals Company (CMC) : Free Stock Analysis Report NWPX Infrastructure, Inc. (NWPX) : Free Stock Analysis Report Metallus Inc. (MTUS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Thursday, July 30, 2026, at 10 a.m. ET Vice President, Investor Relations - John Huyette Chairman, President and Chief Executive Officer - Tony Thene Senior Vice President and Chief Financial Officer - Tim Lain Operator: Hello, everyone, and thank you for joining us, and welcome to the Carpenter Technology Corp Q4 FY '26 Earnings Presentation. [Operator Instructions] I will now hand the conference over to John Huyette, Vice President, Investor Relations. Please go ahead. John Huyette: Thank you, operator. Good morning, everyone, and welcome to the Carpenter Technology Earnings Conference Call for the fiscal 2026 Fourth Quarter ended June 30, 2026. This call is also being broadcast over the Internet along with presentation slides. For those of you listening by phone, you may experience a time delay in slide movement. Speakers on the call today are Tony Thene, Chairman, President and Chief Executive Officer; and Tim Lain, Senior Vice President and Chief Financial Officer. Statements made by management during this earnings presentation that are forward-looking statements are based on current expectations. Risk factors that could cause actual results to differ materially from these forward-looking statements can be found in Carpenter Technology's most recent SEC filings, including the company's report on Form 10-K for the year ended June 30, 2025, Forms 10-Q for the quarters ended September 30, 2025, December 31, 2025, and March 31, 2026, and the exhibits attached to those filings. Please also note that in the following discussion, unless otherwise noted, when management discussed the sales or revenue, that reference excludes surcharge. When referring to operating margins, that is based on adjusted operating income, excluding special items and sales, excluding surcharge. I will now turn the call over to Tony. Tony Thene: Thank you, John, and good morning to everyone. Before I begin this morning, I want to take a moment to share my condolences on behalf of the Carpenter Technology family to Brian Malloy's family. His sudden passing last week was a tragic loss and a shock to all of us. Brian joined the company in 2015 and through various leadership roles was instrumental in advancing Carpenter Technologies' strategic priorities over the last decade. And on July 1, Brian became CEO, a role he was truly excited to take on. Brian will be forever remembered here as a trusted and respected leader for his commitment to our values, employees and the company's long-term success. Brian was a friend, and he will be sorely missed. As you know from our press release, I was reappointed by the Board of Directors to the role of CEO. To be clear, this is not an interim assignment, and we are not launching an external search for a new CEO. The plan is for me to remain as a CEO for an indefinite period of time. Now on to the business of the earnings call. Let's turn to Slide 4 and a review of our safety performance. We start every quarterly earnings presentation with our safety slide, reinforcing that a 0 injury workplace is our #1 value and our ultimate goal. We believe that superior sustainable operational performance is only possible in a company culture that places the safety of their employees as an unquestionable #1 priority. We ended fiscal year 2026 with a total case incident rate of 1.4. We believe we are one of the safest manufacturing companies in the world, but we will only be satisfied with a 0 injury workplace, a target that we firmly believe is possible. Let's turn to Slide 5 for an overview of our fourth quarter performance. Carpenter Technology just delivered another record quarter, reflecting the continued strong operational execution and accelerating demand across our high-value markets. In the fourth quarter, we generated $206.9 million in operating income, exceeding our previous record set in the third quarter by 11%. The profitability was driven by the SAO segment, which delivered an adjusted operating margin of 37.8% in the quarter, another new record for the business. This margin compares to 35.6% in the prior quarter and 30.5% a year ago. As a result of the expanding margins, the SAO segment reported $229.7 million in operating income, an increase of 10% sequentially and another all-time record for the segment and above the expectation we had set for the segment. Importantly, these record earnings translated directly into another strong cash flow generation quarter. In the fourth quarter, we generated $240.1 million in cash from operating activities and $155 million of adjusted free cash flow. And we continued returning cash to shareholders through our dividend and repurchase programs, executing $45.2 million of repurchases in the quarter, raising the total to $179.1 million for all of fiscal year 2026. Turning to Slide 6 and a closer look at fourth quarter sales and market conditions. In the fourth quarter of fiscal year 2026, sales increased in a strengthening demand environment year-over-year and sequentially. Starting with the aerospace and defense end-use market, sales were up 3% sequentially and up 17% year-over-year. Our sales growth reflects accelerating activity across the aerospace supply chain as OEMs continue to push toward higher build rates. Boeing and Airbus continue to increase production against a backlog of approximately 16,000 aircraft, while engine manufacturers remain focused on securing supply to support both increasing production rates and elevated MRO demand. On their earnings call Tuesday, Boeing stated that they expect to achieve rate 47 per month for the 737 this summer, and they discussed their plans to increase to rate 52 per month in the near term. We see this reflected in the sequential increase in bookings for the aerospace and defense end-use market. And we heard this confidence from customers at the Farnborough International Air Show just last week. Our engine customers report strong demand with many commenting that demand is less of a concern than the capacity needed to meet that demand. Our fastener customers are ramping significantly and discussing with us areas where they need more material sooner. Across the board, our structural customers are expecting demand to accelerate in the coming quarters. For an increasing number of structural customers, we are already experiencing accelerated ordering with extending lead times. At the same time, some structural customers remain cautious in their ordering patterns, but at the same time, acknowledging that they are ordering below expected demand rates. We agree. And as that caution fades and ordering aligns with expected production rates, we expect demand to accelerate even further. In the defense submarket, we continue to see strong demand and urgent requests for material across multiple platforms. Moving on to the medical end-use market. Our sales were up 5% sequentially and down 30% compared to the prior year fourth quarter. This is the first quarter in this fiscal year that medical end-use market sales were up sequentially. Our medical end-use market continues to have solid fundamentals, and we see ongoing improvement in demand across orthopedics, dental and cardiology. This quarter, energy end-use market sales flipped versus the large sequential increase last quarter, down 22% sequentially and 12% year-over-year. The demand from our IGT customers, primarily driven by the growing energy needs of data centers remains strong. As we have said many times, quarterly sales for IGT material will fluctuate due to order timing and production scheduling. Finally, we saw a significant uptick in the sales for industrial and consumer end-use market, up 19% sequentially and 22% year-over-year. This was primarily driven by increasing demand from the semiconductor industry, where our materials are used in critical components in the semiconductor production process. We continue to see strong investment in fabrication facilities, semiconductor equipment and supporting infrastructure. Customer confidence has improved, demand remains robust, and our position is strengthening in this market. In summary, we continue to operate in an accelerating demand environment across our high-value end-use markets. We believe that rate of growth will increase in the near term, specifically in the aerospace and defense end-use markets as airframers continue to increase build rates. Combined with our differentiated capabilities and capacity, this positions Carpenter Technology for meaningful growth, both in the near term and over the long term. Now I will turn it over to Tim for the financial summary. Timothy Lain: Thanks, Tony. Good morning, everyone. I'll start on the income statement summary on Slide 8. Starting at the top, sales excluding surcharge increased 9% year-over-year on 22% higher volume. Sequentially, sales were up 4% on 11% higher volume. The improving productivity, product mix and pricing are evident in our gross profit, which increased to $268.9 million in the current quarter, up 26% from the same quarter last year and up 7% sequentially. Selling, general and administrative or SG&A expenses were $62 million in the fourth quarter, roughly flat year-over-year and down $3.3 million sequentially. The SG&A line includes corporate costs, which were $28.6 million. This is up $1.3 million sequentially and up $1.7 million from the fourth quarter of fiscal year 2025. For the upcoming first quarter of fiscal year 2027, we expect corporate costs to be roughly in line with our recent fourth quarter. Operating income was $206.9 million in the current quarter, which is 37% higher than our fourth quarter of fiscal year 2025 and up 11% from our recent third quarter. As Tony mentioned earlier, this represents another record quarterly operating income result, breaking the previous record set just last quarter. Moving on to our effective tax rate, which was 20.7% in the current quarter. This quarter's effective tax rate was lower than anticipated, primarily due to discrete tax benefits associated with certain equity awards. Finally, the earnings per diluted share was $3.23 for the quarter. Now turning to more detail on each of the segments, starting with our SAO segment. Net sales, excluding surcharge for the fourth quarter were $607.4 million. Compared to the same quarter last year, sales were up 11% on 23% higher volume. Sequentially, sales were up 4% on 11% higher volume. The net sales increase that is outpaced by the volume increase translates to a lower reported ratio of net sales, excluding surcharge per pound. In other words, a lower average base price per pound, both sequentially and year-over-year. In the past, some have mistakenly interpreted a lower aggregated average base price as an indication of declining prices in the portfolio. For those of you newer to the story, it's important to remember that the average base price per pound for the SAO segment in any given quarter is highly dependent on the mix of products. As in previous quarters, the decline in average selling price in the recent quarter is due to the higher proportion of lower-priced products in the mix of materials that we shipped in the quarter. Importantly, the lower-priced products often come with comparable average profit margins. That is clearly evident in SAO's adjusted operating margin for the fourth quarter, which increased for the 18th consecutive quarter to a new record level of 37.8%. The continued margin expansion reflects the SAO team's ability to actively manage our production schedules, increase productivity at key work centers, manage costs and execute thoughtful planned maintenance activities. As we have said many times before, quarterly operating margins may be impacted by a number of short-term factors, most notably product mix. That said, clearly, operating margins remain on an upward trajectory, supported by our core drivers, including productivity, mix and pricing. As a result of the higher sales and expanding margin, SAO reported operating income of $229.7 million in the fourth quarter, a new all-time high for the segment. As we look ahead to our first quarter of fiscal year 2027, we anticipate SAO will generate operating income in the range of $218 million to $222 million. This implies an impressive 28% to 30% increase from SAO's first quarter of fiscal year 2026. The outlook considers the elevated preventative maintenance levels that traditionally occur in our first fiscal quarter. The preventative maintenance, while reducing the amount of operating time in the quarter is required to keep our assets healthy and running effectively over the long term. As in previous years, we will offset a portion of the loss in operating time with improved productivity and portfolio optimization. Now turning to Slide 10 and our PEP segment results. Net sales, excluding surcharge in the fourth quarter of fiscal year 2026 were $98.2 million, up 1% year-over-year and 8% sequentially. We saw sales increase across most of our end-use markets sequentially, most notably our titanium products in the medical end-use market. As Tony mentioned earlier, our medical end-use market continues to have solid fundamentals, and we are continuing to see improving demand. In addition, our additive business continues to deliver year-on-year and sequential sales growth driven by aerospace and defense demand. PEP reported operating income of $7.1 million in the current quarter compared with $6.7 million in the third quarter of fiscal year 2026 and $11.7 million in the same quarter a year ago. We currently anticipate the PEP segment's operating income for the upcoming first quarter to be between $6 million and $7 million. Before we move to cash flow, I want to pull together the pieces that make up our outlook for operating income for the first quarter of fiscal year 2027. We anticipate total operating income of $195 million to $200 million. This includes SAO $218 million to $222 million, PEP at $6 million to $7 million and corporate costs of approximately $29 million. Our guidance for the first quarter of fiscal year 2027 implies delivering operating income that would be 27% to 30% higher than last year's first fiscal quarter, which was then a record best first quarter. Now turning to the next slide to talk about our cash generation and capital allocation priorities. In addition to the strong earnings performance, we've generated meaningful cash flows driven by higher earnings and ongoing efforts to manage working capital closely, particularly inventory. In fiscal year 2026, we generated $605 million of cash from operating activities, a 37% increase over fiscal year 2025. The cash generated from operations more than supports the $242.7 million in capital spending in fiscal year 2026. The capital spend includes the brownfield capacity expansion project. As anticipated, capital spending ramped up in our recent fourth quarter, totaling $85.1 million as activities around the capacity expansion project accelerated. A brief update on this project. The brownfield capacity expansion remains on budget and on schedule to be completed by the start of fiscal year 2028. The construction phase is well underway with key equipment being delivered and on-site assembly and installation progressing. And the project remains focused on not only completing construction and installation of equipment, but also preparing for a smooth start-up of operations. With those details in mind, we generated $362.3 million in adjusted free cash flow in fiscal year 2026, ahead of what we had anticipated. We continue to execute our balanced capital philosophy that includes investing cash in attractive and accretive growth projects like the brownfield capacity expansion and returning cash to shareholders. To that end, we continue to execute against our repurchase authorization and repurchased $179.1 million of shares in fiscal year 2026. This brings the total to $281 million spent to date against the $400 million authorization that we announced in July of 2024. And in addition to the buyback program, we also continue to fund a recurring and long-standing quarterly dividend. Finally, our ability to deploy capital is also supported by our healthy liquidity and strong balance sheet. As of the most recent quarter end, our total liquidity was $892.4 million, including $393.3 million of cash and $499.1 million of available borrowings under our credit facility. Our credit metrics remain very strong with our net debt-to-EBITDA ratio remaining well below 1x. Altogether, we believe our strong balance sheet and outlook for significant cash generation positions us well to fund continued growth and deliver significant shareholder returns. Before I turn the call back to Tony, I want to highlight that as we have done in the past, we have included a slide in the appendix of this presentation that includes selected guidance to help model our anticipated fiscal year 2027 results. With that, I will turn the call to Tony. Tony Thene: Carpenter Technology just delivered another significant record-breaking year of profitability. For fiscal year 2026, we generated $702 million in adjusted operating income, a 34% increase over fiscal year 2025 and more than 5x fiscal year 2023. It is clearly a testament to our focus on execution, backed by a strong market position, broad solutions portfolio and unique capabilities that we were able to deliver another record-breaking year. In addition, with the record earnings and disciplined working capital management, we generated $362.3 million in adjusted free cash flow, including investment in the brownfield expansion project, and we continue to return cash to shareholders. Over the course of the fiscal year, we executed $179.1 million in share repurchases in addition to $40.3 million in dividends. And we believe our current record results are far from our peak. The same dynamics that drove our success in fiscal year 2026 are only strengthening as we look ahead over the next several years. With that, let's turn to the next slide for our outlook. At the outset, I want to emphasize that our approach to target setting remains the same. We believe in setting targets that we have a high level of confidence we can achieve based on what we can see today. At the same time, our team always focuses on identifying opportunities to exceed the commitments we make. With that in mind, let's start with the near term. As Tim detailed, we are projecting a strong start to fiscal year 2027, with operating income projected between $195 million and $200 million. For the full fiscal year 2027, we expect between $850 million and $880 million of operating income. That represents approximately 21% to 25% growth over our record fiscal year 2026 performance and continues what we believe is one of the strongest earnings growth trajectories within our industry. Importantly, this outlook is supported by anticipated strengthening demand across our most important end-use markets. Looking beyond fiscal year 2027, we expect our strong growth momentum to continue. Our fiscal year 2029 operating income target of approximately $1.2 billion to $1.3 billion reflects both the continued strength of the projected underlying demand environment and the contribution from our brownfield expansion project. Notably, the fiscal year 2029 target represents more than a 20% 3-year CAGR on our record fiscal year 2026 operating income, a number that we believe sets us apart from our industry peers. And we do not believe fiscal year 2029 represents the peak of our earnings power as the brownfield projects will still be ramping production while the underlying demand environment continues to strengthen. Now let's talk about cash generation. Over the last several years, we have demonstrated the ability to convert earnings into cash. For fiscal year 2027, we anticipate between $400 million and $430 million of adjusted free cash flow. Note that level of cash generation includes the remaining investment in our brownfield expansion project that we expect to be completed in early fiscal year 2028. Looking beyond fiscal year 2027, we expect cash generation to continue increasing as earnings expand and the brownfield project contributes to profitability. That brings me to capital allocation. I think it's important to clearly state that our balanced capital allocation philosophy remains unchanged. That is we are focused on maintaining a balance between investing for growth and returning cash to shareholders. First, we will continue investing in the business. Second, we remain committed to returning capital directly to shareholders. We have a long-standing dividend that reflects the strength and consistency of our cash generation. In addition, to complement the quarterly dividend, we continue to execute against our share repurchase program. The strength of our earnings growth, cash generation and balance sheet gives us the ability to invest for future growth while simultaneously returning meaningful capital to shareholders. When you step back and look at the outlook we've provided today, we believe it represents one of the strongest growth profiles in our industry. And as we have done in the past, we will work not only to meet these impressive targets, but exceed them. Now let's take a step back and summarize this great story. Fiscal year 2026 was another year of record financial performance and demonstrates the strength of our strategy, a strong market position and our team's ability to execute. We delivered record quarterly profits with fourth quarter operating income increasing 37% year-over-year and driving operating income to a record $702 million for the full fiscal year. Within our Specialty Alloys Operations segment, adjusted operating margins continued to expand and reached 37.8%, highlighting the power of our business and the benefits of disciplined execution. We also converted those earnings into meaningful cash generation, producing more than $360 million of adjusted free cash flow during the year, including funding our brownfield capacity expansion. And importantly, we continued returning capital to shareholders, executing approximately $179 million in share repurchases while maintaining our long-standing dividend. As I just detailed, our earnings outlook continues to strengthen, supported by the same drivers that have fueled our success over the last several years, productivity improvements, product mix optimization and favorable pricing actions. For fiscal year 2027, we expect operating income to be substantially higher than our record fiscal year 2026 performance while continuing to generate significant cash flow. Looking beyond fiscal year 2027, our brownfield capacity expansion project will begin contributing in fiscal year 2028, providing an additional accelerator to our earnings growth profile. And by fiscal year 2029, we expect operating income to reach approximately $1.2 billion to $1.3 billion. That's a 20% plus CAGR over 3 years, a rate that we believe exceeds most in the industry. Just as importantly, we do not view fiscal year 2029 as the peak of our earnings power. The market dynamics we've discussed today are expected to continue to strengthen and the brownfield expansion will still be in the early stages of its contribution. Finally, we believe Carpenter Technology offers an attractive long-term investment opportunity. We are operating in an accelerating demand environment across many of the most attractive end-use markets in the world. Our portfolio consists of highly specialized solutions serving critical applications where performance matters. qualification cycles are long and the barriers to entry are significant. We have built a unique collection of manufacturing assets, process technologies, metallurgical expertise and customer relationships that we believe are extraordinarily difficult to replicate. In addition, our strong balance sheet and growing cash flow generation provide us with the flexibility to maintain a balanced and disciplined approach to capital allocation. We will continue investing in profitable growth opportunities, including our brownfield expansion project. We will continue supporting our long-standing dividend, and we will continue returning excess capital to shareholders through our share repurchase program. When you put all those elements together, the investment proposition is straightforward. We are delivering record results today. We have a clear path to significant earnings growth in the years ahead, and we remain committed to creating meaningful long-term value for shareholders through disciplined execution, continuous improvement and profitable growth. Thank you for your time, your interest and your continued confidence in Carpenter Technology. Operator: [Operator Instructions] Your first question from the line of Scott Deuschle of Deutsche Bank. Scott Deuschle: Tim, can you share what the FY '29 EBIT guide assumes with respect to the brownfields contribution to earnings? Timothy Lain: Yes, Scott. So let me talk a little bit about just reaffirm some of the stuff we've already said about the brownfield project. In our prepared remarks, we said it's on track, on schedule, on budget. It comes online early fiscal '28. And then through '28, we expect to ramp up production of that new -- of those newer assets. And in '28, we expect it to be OI incremental. So that's a big deal for a project like that. And then the next milestone we set when we announced the project was in 2030, it would contribute roughly $150 million of incremental OI. So '29, you referenced the EBIT guide, we gave a '29 number. It won't quite be linear between that first year and the $150 million in 2030. We'd expect it probably actually to be a little bit more weighted towards the '30 number, but that's all baked into the current guide. Scott Deuschle: Okay. Is the $150 million in 2030 still the right number? Or is it biased higher given how pricing has trended since you introduced that guide? Timothy Lain: I mean, since we announced -- Scott, I would say it's fair to say that we are more confident in those numbers, and we would expect could drive higher. But I think for now, we're going to keep the $150 million out there for 2030. Scott Deuschle: Okay. And then Tony or Tim, can you parse out the 23% SAO volume growth in the quarter by end market? Timothy Lain: Yes, Scott, I mean, you can see that there was a lot of growth from a volume perspective in our industrial and consumer business sequentially. That leads to, okay, what I talked about on the call, this average price per pound. That's not necessarily a negative. That just means we ship more volume of some of the lower-priced material, but it carries an overall attractive margin profile. So that's why we saw the margin growth in SAO in the quarter. Scott Deuschle: Okay. And my last question is for Tony. And the thing I'm just a bit confused by is the business has been accelerating EBIT growth in each of the last few quarters, but the guide for the first quarter and for 2027 as a whole implies that this EBIT growth begins to moderate a bit, still very strong, but moderates. And I'm a bit confused by that because it seems like the A&D demand presumably is still very strong, A&D volume growth should still be very strong and the pricing backdrop seems to me is only getting better. And so why would the EBIT growth moderate from here as opposed to accelerate in that backdrop? Tony Thene: Scott, I appreciate your question. I don't necessarily disagree with you on that. I think from our standpoint, our goal is always to have guidance is right out in front of us. I'll say this, if you want to take that guide and say that's the floor for FY '27, you wouldn't get any pushback from me. Operator: Your next question from the line of Gautam Khanna of TD Cowen. Gautam Khanna: My condolences to all of the people connected to Brian, that's a real tragedy. Of course. And we're very lucky to have you back in the seat, Tony. So thanks for doing that. Tony Thene: Thank you. Gautam Khanna: I wanted to ask a couple of questions. On the comment of OI accretive in '28 and not being linear, just to be clear, Tim, were you trying to say that it will be closer to the $150 million, not closer to the barely breakeven? Is that what you meant to say? So north of $75 million or something. Timothy Lain: Yes, not quite the midpoint between those 2, but more towards the $150 million, yes. Gautam Khanna: Okay. Cool. Tony Thene: Gautam, if I can say, it gets difficult on that projection, right, because you heard Scott earlier talk about, well, is the $150 million now a bit dated. And of course, the pricing is higher. But as we run through qualifications as well, we're not 100% sure of the exact mix of those products. So that's why we're a bit hesitant to just put on some type of higher price on those products. We don't believe I should put a target out there that we hope to hit. We think we should put one out there that we have confidence in. So that's why you see us maintaining that $150 million because at this point in time, we just don't know 100% what the exact mix of products we run across those assets. Gautam Khanna: That's very helpful. And maybe, Tony, just as you thought about guidance for '27 and also for '29, but for '27 more immediately, what do you anticipate in terms of the contributors to that operating income growth maybe in order of rank. So price, volume, productivity, mix, I guess, productivity and volume are very related. But how would you rank order those? Is price the biggest driver? I'll let you off. Tony Thene: Yes. No, it's a good question, Gautam. Maybe I'll give you a direct answer and maybe a little commentary just on guidance in general. But we talk about price mix, volume, probably the biggest, most significant input to FY '27 is the build rate that Boeing and Airbus is going to hit, right? I mean that's the biggest input that all of us have. Now we've made assumptions to that, but that's the biggest input. And then if you take a step back, certainly, price is going to be a big driver for us, but also volume, as Tim talked about volume in some of the non-aerospace markets, volume is going to come and be a significant tailwind as well. It has to be -- you're still at build rates that are much less to where they want to be. And the comments I made in my prepared remarks, you still have some structural customers, Gautam, that are still not ordering at the levels that they acknowledge they should be ordering at. Let that sink in for a minute. So I think it just magnifies any type of significant uptick in ordering and volume when that does hit, and that will be in this fiscal year for us, of course. So I think that's -- all those are going to be major drivers. And you know us well enough, you've covered us a long time. Productivity is always a big factor for us. We are never satisfied where we're at today. And as you look at our plans for this fiscal year, there is a healthy dose of productivity actions that we have in there. Gautam Khanna: That's helpful. And last one for me before I turn it over. Just if you could walk through kind of some of the submarket order rates and maybe sales growth rates, engine, fasteners, structural.... Tony Thene: Yes, I'll do that. And maybe I just want to take a step back because I do want to come back to this guidance piece and what it should be, what it shouldn't be. Gautam, I think it's important to understand myself and my team, we all understand that everybody has a model and everybody has corresponding expectations. And of course, I would say the reaction to earnings guidance, you must consider the personality of the company that's giving that guidance. And I mean, what do I mean by that? I mean, Corporate Technology provides guidance not that we hope we can achieve, we believe in setting targets that we have a high level of confidence in and what we can see today and then immediately starting to say what I have as far as plans in place and then what I can do to overachieve them. And again, you've covered us long enough to know that we are very disciplined from an operational standpoint, commercial standpoint, and we've proven quarter-over-quarter. The proof is in the numbers. So I would argue those are the 2 factors are the reason that we've consistently overachieved what we put out there as targets. So as I said to Scott, if you want to consider FY '27 to floor, you won't get any pushback from me because we're already focused on overachieving that. And I think before we get too far out ahead of ourselves, and Gautam, I think you had mentioned this, let's just keep in mind what the guidance we just gave, right? I mean that guidance we just gave is 25% higher than our record fiscal year 2026. And as you noted in your note, probably the strongest earnings growth trajectories in the industry. So through all this noise, I'm proud to say we've got a team that's going to put their head down, and we're going to deliver quarter after quarter. We're going to do it the right way. We're going to do it in a sustainable way. And I think that operational discipline paired with an aerospace demand environment that appears to be poised to expand significantly over the next couple of years, that should yield substantial shareholder value. So I guess that was a long-winded way of saying, Gautam, the bottom line for me is I wouldn't bet against this. Gautam Khanna: Understood. And the submarkets, color, if you have it? Tony Thene: I do. Just as a highlight, I'd say, hey, listen, from an overall aerospace standpoint, as you saw on our slide, up 3% sequentially, 17% year-over-year. That was the highest quarter all time for aerospace for us. So that's an important point to make. And if you look at FY '26 in total, that was an all-time high. You did that while Boeing was working to regain its footing and Airbus wasn't where it wanted to be. So it kind of pairs to what I just said from a volume standpoint, there's still a lot more to come there. Now to your specific question, you waited long enough. The submarket details, aero engines was up almost 30% year-over-year. It was down a bit sequentially, low single digits, just that was on a sequential quarter before was a very strong one. But even with that, it was the second highest in history. So a very -- another strong aero engine sales quarter. I know you always ask about aerospace fasteners. They were up 10% sequentially, 12% year-over-year. If you take that bucket where it's almost got the non-fastener, non-engine, so that structural distribution bucket that we've talked specifically about those customers, that was up again significantly this quarter, up 25% quarter-over-quarter, 8% year-over-year. And I know there was some maybe confusion last quarter about how does that all balance out. You've got -- aero engine was down slightly. Defense was also down sequentially about 10%, and that's normal. That's related to the specific nature of this submarket and how it's built on very program specific. Hopefully, that helps you Gautam. Operator: Your next question from the line of David Strauss with Wells Fargo. David Strauss: My condolences as well on Brian's unfortunate passing. So your aero and defense for you guys grew 15% ex surcharge in '26. You mentioned 17% in Q4. What do you -- does that growth rate you think accelerate in '27 relative to '26? Tony Thene: Yes, that's a good question. I mean, of course, we see aerospace being meaningfully higher in FY '27. I mean, as you all know, you've been around longer. You know it has to be higher with the build rates that Boeing and Airbus wants to hit. Is it exactly that same growth rate? I think you could argue that, that would be the case. The reason I'm hesitating a bit, obviously, it depends on the success primarily of Boeing and when they can get to that next level and then the level after that. David Strauss: Okay. And would you think within that, that structures would -- structural would outgrow engine, just given it sounds -- based on your prior comments, it sounds like you're a bit just kind of capacity constrained on the engine side until the brownfield comes online. Tony Thene: Yes. I don't -- I mean there's still -- we've still got some room that we can work with primarily from a productivity standpoint, the accomplishments we're making quarter-over-quarter. But I think you could see a situation where the growth in structural will lead the pack only because it's been so depressed here recently, right? So there is a big recovery that's needed. We've seen this many, many times, right? We saw it just a couple of years ago when Boeing had the issue with Alaskan Airlines, you had the strike. You saw the same thing happen. So I think you're going to see structural. When that does turn the corner and you see that ordering pattern pick up, it's going to be significant. David Strauss: Okay. And then last one, rather than focus on kind of the EBIT number for SAO what's the right way to think about kind of incremental margins from here or margin improvement? I mean last year, margins improved 600 -- something like 600 basis points, incremental were close to 100%. I mean, I know you've made it clear the guidance is very conservative for this year. But I mean, it would imply, I think, that incremental closer to like 50%. I'm just trying to kind of think about given all the moving pieces here in terms of the price per pound that we calculate, all these various different things, like what do you think about kind of the incremental margin level for Specialty alloy, that business, what it should look like from here? Tony Thene: No, it's a good question. And I can tell you now, this isn't the floor for us. I mean, we do believe that we've got opportunities to move higher. Now it certainly gets tougher and tougher, the higher you get, obviously. And as you stated before, I'm really not going to start forecasting our quarterly operating margins are, but we believe there's a lot more growth for us to go -- to have going forward, especially some of the work we're doing around productivity is pretty significant. So I think as we get a couple of quarters into FY '27, we'll see how that lays out. But we still expect very good performance from that standpoint. Operator: Your next question from the line of Bennett Moore with JPMorgan. Bennett Moore: This is to the team and Brian's family. I wanted to start with some of your commentary on the cautious ordering from the structural customers. And I guess, based on your conversations with those customers, what do you feel is really contributing to this? Or said another way, what are these customers looking for to move off the sidelines? Is it really just the next leg hire in Boeing's ramp? Or is there other things in the market they're looking for? Tony Thene: No, I think that's the main thing. And by the way, Bennett, thank you for your comments. That's the primary driver. They've had a history of maybe being burned in the past. A lot of it depends on the individual metrics of that company and what they grade themselves on that they might be a little bit more cautious. So there's not just one answer to that. But yes, I think as you see Boeing continue to improve as they are, I don't think that ordering pattern will be gradual. I think it will be -- when that time hits here in the next quarter or 2, I think you'll see a significant uptick. If history is any indication of what's going to happen, you'll see that significant uptick. Bennett Moore: Understood. And then space has become a growing area of interest. I'm interested in your latest thoughts on the opportunity there. And if you could remind us how your exposure is split between SAO, PEP and I guess, within SAO, to what extent do these products compete for time on the asset with engine alloys? Tony Thene: Yes, it's a good question because we do have both SAO and PEP selling to the space market. On the PEP side, it's primarily our additive business, and that's quite strong right now. On the SAO side, yes, that space could potentially compete with aero engine alloys. There are some similarities there, not 100%. And again, that tonnage right now is very low compared to engines, but that could compete on similar assets. Bennett Moore: And then my last one real quick is in the past, you guys guided to, I believe, a 90% free cash flow conversion for the prior FY '27 free cash flow guidance. I'm wondering if this is still applicable and also, Tim, how we should think about CapEx cadence through the year? Timothy Lain: Yes, Ben, in '26 and the number we provided for '27, there are growth investments in the reported adjusted free cash flow. But when you look at those and say, take the growth investments out, we've demonstrated that we can hit that 85% to 90% type conversion ratio, both in '26. So we demonstrated that and then what we've projected for '27 and the guidance we provided. And then going forward, as that -- as the large growth project right now wraps up and we bring that online in '28, on a go-forward basis, we'd expect those kinds of conversion rates. Still continue to maintain our balanced capital allocation. But given the growth in profitability that we've laid out and our focus on managing working capital, we think that's more than attainable in the future, too. Bennett Moore: And the CapEx cadence, please? Timothy Lain: Yes, sorry, CapEx cadence. I mean given the project, the brownfield project is pretty much in full swing, a lot of activity there, a lot going on. I would expect that it would be fairly ratable throughout the year. Operator: Your next question comes from the line of Josh Sullivan with JonesTrading. Joshua Sullivan: I want to extend thoughts to Brian's family and Carpenter. He's a great asset and importantly, a good guy. Tony, just wanted a clarifying point on the guide for '29. Does that guidance assume those cautious customers have come back and are pulling at anticipated build rates at that point? I know it's up in '29, but just curious what contribution you're thinking about from those more cautious players. Tony Thene: Yes. I think it's going to be -- they'll get more aggressive quite a bit earlier than FY '29. So the answer is yes. Joshua Sullivan: Okay. And then just on Dynamet, as aerostructures picks up and medical looking a little bit better, what is the cadence in the Dynamet margin profile look like between now and '29? Tony Thene: Well, that's a good question. I mean, obviously, Dynamet, we see it as a strategic asset. But at the same time, it's a very small portion of our overall operating income. I mean, SAO is 95% plus of our segment operating income. So it is -- again, we see it as very strategic, but it's very, very small. At the same time, I see Dynamet over the next 2 to 5 years being a bigger contribution to overall operating income. We flipped Dynamet. It used to be probably 60% aerospace. It's probably flipped and become more of a medical business than aerospace, that 60-40 has split. So again, relatively small now and not a big driver to our overall guidance for FY '27, to be honest, really not that much of a driver to FY '29, although we have ticked that up going forward. I think there's a lot of opportunity there, Josh, for us to take that to the next level. Joshua Sullivan: Okay. And just any update on Athens? To your point on the call, Carpenter is always great at overachieving and efficiency and productivity. Are you finding any potentially upside production opportunities or ancillary expansion opportunities as you put Athens together, the brownfield... Timothy Lain: Well, as Tony said this earlier, I mean, I think we think there's always opportunity. But I also say this project that we're working on the Brownfield project is a pretty complex project. So -- and we're managing that project. Within that project, we're always finding, hey, there's pluses or minuses we could potentially change some design here or there. But given the complexity of it, Josh, it's not necessarily -- those aren't necessarily big opportunities. But as we finalize and get -- we're, call it, 12 months away now from bringing that online, I think there's going to be some things that we'll find along the way, and we'll talk about that as we go. But it's such a complex project and it's such a big deal for us that we don't really want to veer too far off from getting that project done, if that makes sense. Operator: Your next question from the line of Andre Madrid with BTIG. Andre Madrid: Condolences to everyone. Could you maybe just talk a bit more about what's implied in your FY '29 outlook at a submarket level, just looking at engines, fasteners, medical and then maybe even further to the extent that you can, aftermarket and OE. I know that is a little bit -- it gets a little grayer at that point. But just really trying to understand the moving pieces to the '29 numbers, especially given that concerns these days are mounting around accelerating retirements and whatnot. Tony Thene: Well, I don't have any concerns at all about the mix between OEM and MRO or aftermarket in FY '29. We've talked about that extensively. There's been other people in the industry, very experts talk about that in the industry. So there is no concern about that. And I think it's premature for me to talk about in detail what's in the FY '29 number. You should assume that we see all of our markets increasing going forward in FY '29 because we have all of these -- we're in the right markets, the high-value end markets. All the macro demand signals are pointing very positive. So all of our markets, we expect to be higher in FY '29. Remember, with aerospace and medical, IGT, you're well over 80% of our revenue and all of those are projected to be very strong going into FY '29 and beyond, and we have the same viewpoint. Andre Madrid: Got it. And then I guess, looking again still at FY '29, you've said it's at the peak of earnings. I mean, is that on a margin or a nominal earning basis or both? And maybe additionally, if it is on margin, what do you truly view as maybe the high watermark for margins? Tony Thene: Andre, you thought you might get me at a weak moment and I tell you what the margin is in our model. But I would say to the first part of your question is both, right? As we look past FY '29, we usually go out 5 years for us internally, and we see growth. That's why we're able to say we see -- we're confident we see growth beyond FY '29. Andre Madrid: Got it. Got it. And then I guess just longer-term capital deployment, I mean, you're almost at $900 million total liquidity now. I can only imagine by FY '29, I'm not going to ask specifics, but like obviously, the cash on hand will continue to grow as well. I'm curious, is M&A on the table at all? And if so, what does the process look like? I'm just curious to see if maybe beyond organic investments and growth you guys are looking inorganically. Tony Thene: Well, of course, I mean, you would guess that a company like us, we get all of the notices whenever something is "available," and we do our research on all of those. So I'll never say no. But when you have such attractive organic projects or possible projects in front of you, it's hard to rank an M&A opportunity higher than that. I mean it just gets -- when I can control my own destiny and do what I'm doing internally, I mean, the risk profile is much better for me. That's not a no, but it's just a tough one to make that work. I don't want to just -- I don't want to buy M&A or buy something just to buy something. And I think the important point here is what you said earlier, you see a significant amount of cash generation going forward, right, for FY '29. If you look at that $1.2 billion to $1.3 billion, that's 3 years out. Someone would ask, do you think that number could be higher? Of course, it could. It very easily could be higher based on what the build rates are. And then you put that type of cash conversion number on that, that's a significant amount of cash. And that's the reason why we repeated 3 or 4 times in this call that we're going to have a balanced capital allocation process. So there are still growth investments we can make in our core markets, maybe some of our smaller markets as well at a much lower level that doesn't disrupt the supply-demand balance that we can work on. And it tells you that we're going to be committed to returning cash to shareholders. You should expect that in any given time, we'll probably have some type of share repurchase program in place. We're always going to have the dividend. So it's a good situation to be in to have that amount of cash that you believe you're going to be able to generate and then have a very strong philosophy to be very balanced in how you take care of that cash. Operator: [Operator Instructions] Your next question comes from the line of Gautam Khanna of TD Cowen. Gautam Khanna: Just a quick couple of follow-ups. One, I wanted to ask if lead times have changed much at all on engine or other products. Tony Thene: Yes, lead times are relatively consistent quarter-over-quarter. There are some specific products that you see that pushing out. Again, we cap that, as you know, we're not taking orders 2 years out. But I would see that, that's going to accelerate quite a bit here over the next quarter for sure over the rest of this calendar year. Gautam Khanna: Okay. Great. And then, Tony, I know in the past, sometimes you've given color on long-term agreements that come up for renewal and kind of the magnitude of price hikes associated with those. I was wondering over the next year or 2, are there a number of LTAs that come up for renewal again? Any way to kind of frame that for us, percentage of business that kind of on the LTA side that gets repriced again between now and 2029. Tony Thene: It's an excellent question, Gautam. I won't give you -- I will disappoint you and say I won't give you the exact percent of what comes up. But I will say there are a couple of very significant contracts that will come up for renewal over the next 2 years, and I will go as far as saying there's one that we're -- a large one that we're currently working on now. So yes, there's still opportunity there. Timothy Lain: And just -- I mean, one more point on that, too, Gautam, in addition to those bigger contracts, there's always -- talked about this before, always a bit of a churn. So there's always contracts coming up for renewal. There's no magical. They all roll over on this date. So there is a constant refresh. Gautam Khanna: I guess one of the things I was curious about as a follow-up to that is way back in the day, I remember Carpenter sometimes entered into 10-year contracts. Are any of those still in the book of business? Or are these that are coming up stuff that has been already renewed since COVID? So you wouldn't see this massive kind of reprice due to inflation that has to get caught up? Like do you still have any of those 10-year wins on the books that were pre-COVID that are coming up? Tony Thene: I'll give you one more answer. Yes. Gautam Khanna: Okay. Good. Tony Thene: And we already have some that are turning over as well because of the shorter duration. We have some that we're working on now that's the second time. If you start the clock in 2021 or 2022, let's say, 2022, Gautam, we have some that we're doing the second term is that one. Gautam Khanna: Is there any -- I'm sorry, I'm asking too many questions. But I am curious, like in the LTA book, is there any way to dimensionalize the percentage of those that are coming up for renewal that are pre-COVID terms, if you will, that are still to be renewed versus ones that are coming around for their second renewal. Tony Thene: I would say it's not significant, right? It's not significant. We've moved most of those out. But the reason I said one answer, yes, because I didn't -- I was hoping you wouldn't ask for more follow-up, but I should have expected that from you that yes, there's still 1, maybe 2 that's pre-COVID. Operator: Your next question from the line of Scott Deuschle of Deutsche Bank. Scott Deuschle: Yes. Just to follow up on that, Tony, can you share how your share position has changed or not changed on newer LTAs, particularly with the large engine manufacturers? Not asking on any specific customer, but just on balance across the recent LTAs you signed, how has your share trended? And to what extent does it even matter if you're sold out? Tony Thene: Well, what you just said at the end is the most important comment. But I will tell you this, that every contract in the aerospace side that we're working on, they ask for more and more material. Not less. Scott Deuschle: Okay. And your share of that material is generally holding in? Tony Thene: Well, that's what I'm talking about our share, right? So I'm saying whatever the past -- usually the contractor some percent of their needs, they are wanting more that percentage to be higher and higher with each contract. Operator: This concludes our Q&A session. I will now turn the call back to John Huyette for closing remarks. John Huyette: Thank you, operator, and thank you, everyone, for joining us today for our fiscal year 2026 fourth quarter conference call. Have a great rest of your day. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Carpenter Technology, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Carpenter Technology wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Carpenter Technology (CRS) Q4 2026 Earnings Call Transcript was originally published by The Motley Fool

Carpenter Technology Corporation CRS entered fiscal 2027 with record profitability and an expanded earnings outlook, as management highlighted accelerating aerospace demand, improving margins and long-term capacity expansion. The company also introduced a fiscal 2029 operating income target that reflects continued confidence in its growth trajectory. Management emphasized that productivity gains, favorable pricing, product mix improvements and demand across high-value markets are supporting results. The call also focused on the brownfield expansion project and how it could extend earnings growth beyond the current year. Carpenter Technology reported fourth-quarter fiscal 2026 earnings per share of $3.23, exceeding the Zacks Consensus Estimate of $3.03. Revenues came in at $851 million, ahead of the Zacks Consensus Estimate of $847.8 million. Carpenter Technology Corporation price-consensus-eps-surprise-chart | Carpenter Technology Corporation Quote The company delivered record quarterly operating income of $206.9 million, up 37% year over year and 11% sequentially. Chief executive officer Tony Thene said the performance reflected continued operational execution and strengthening demand across specialized end markets. Carpenter Technology completed fiscal 2026 with adjusted operating income of $702 million, up 34% from fiscal 2025, making it the company’s most profitable year on record. The Specialty Alloys Operations ("SAO") segment remained the primary earnings driver, generating $229.7 million of operating income in the quarter. The segment’s adjusted operating margin excluding surcharge revenues reached a record 37.8% compared with 35.6% in the prior quarter and 30.5% a year earlier. Thene said margin expansion was supported by productivity improvements, pricing realization and better product mix. Chief financial officer Timothy Lain noted that changes in average selling price per pound reflected shipment mix rather than pricing pressure, as lower-priced products maintained attractive margins. SAO sales excluding surcharge increased 11% year over year on 23% higher volume. Management said ongoing production scheduling discipline and efficiency improvements continue to support profitability. Aerospace and defense remained a major growth driver, with fourth-quarter sales increasing 17% year over year. Thene said aerospace activity is improving as aircraft manufacturers increase production rates and customers seek additional material availability. Management highlighted strong demand from engine manufacturers, fastener customers and structural suppliers. Thene said some structural customers remain cautious but are ordering below expected demand levels, creating additional upside if ordering patterns normalize. A TD Cowen analyst asked about the drivers behind fiscal 2027 growth. Thene said aircraft build rates, particularly from Boeing and Airbus, are expected to be the most significant factor, alongside pricing, volume growth and continued productivity actions. Carpenter Technology’s brownfield capacity expansion project remained on schedule and budget, with completion expected by the start of fiscal 2028. Management said the project is expected to become an incremental contributor to operating income in fiscal 2028. A Deutsche Bank analyst asked about the project’s contribution to the fiscal 2029 outlook. Lain said the company expects the expansion to contribute meaningfully during the ramp-up period, with the previously stated $150 million operating income contribution target for 2030 remaining in place. Management noted that the project is designed to support future demand rather than simply meet current requirements. The company expects capacity additions to strengthen its ability to serve aerospace and other high-value applications. Carpenter Technology expects fiscal 2027 operating income of $850 million to $880 million, representing 21% to 25% growth from fiscal 2026. The company also expects adjusted free cash flow of $400 million to $430 million during the year. For the first quarter of fiscal 2027, management expects operating income of $195 million to $200 million, including SAO operating income of $218 million to $222 million. Looking further ahead, Carpenter Technology established a fiscal 2029 operating income target of $1.2 billion to $1.3 billion. Management said the target reflects demand strength, productivity improvements and contributions from the brownfield expansion. The company generated $605 million in operating cash flow during fiscal 2026 and $362.3 million in adjusted free cash flow. Management said strong cash generation supports both growth investments and shareholder returns. Carpenter Technology repurchased $179.1 million of shares during fiscal 2026 and continued paying its quarterly dividend. The company ended the quarter with total liquidity of $892.4 million, including cash and available borrowings. Management reiterated a balanced capital allocation approach focused on investing in expansion projects while returning capital through dividends and share repurchases. Carpenter Technology carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is driven by earnings estimate revisions and is designed to help identify stocks with potential relative outperformance over the next one to three months. The Rank can change as analysts revise estimates following quarterly results. You can see the complete list of today’s Zacks #1 Rank stocks here. The stock has a Value Score of F, Growth Score of A, Momentum Score of C and VGM Score of C. Zacks Style Scores range from A to F, with higher scores representing stronger characteristics for each investment style category. 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 Carpenter Technology Corporation (CRS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Thursday, July 30, 2026 at 10:00 a.m. ET Vice President, Investor Relations - John Huyette Chairman, President and Chief Executive Officer - Tony Thene Senior Vice President and Chief Financial Officer - Tim Lain Operator: Hello, everyone, and thank you for joining us, and welcome to the Carpenter Technology Corp Q4 FY '26 Earnings Presentation. [Operator Instructions] I will now hand the conference over to John Huyette, Vice President, Investor Relations. Please go ahead. John Huyette: Thank you, operator. Good morning, everyone, and welcome to the Carpenter Technology Earnings Conference Call for the fiscal 2026 Fourth Quarter ended June 30, 2026. This call is also being broadcast over the Internet along with presentation slides. For those of you listening by phone, you may experience a time delay in slide movement. Speakers on the call today are Tony Thene, Chairman, President and Chief Executive Officer; and Tim Lain, Senior Vice President and Chief Financial Officer. Statements made by management during this earnings presentation that are forward-looking statements are based on current expectations. Risk factors that could cause actual results to differ materially from these forward-looking statements can be found in Carpenter Technology's most recent SEC filings, including the company's report on Form 10-K for the year ended June 30, 2025, Forms 10-Q for the quarters ended September 30, 2025, December 31, 2025, and March 31, 2026, and the exhibits attached to those filings. Please also note that in the following discussion, unless otherwise noted, when management discussed the sales or revenue, that reference excludes surcharge. When referring to operating margins, that is based on adjusted operating income, excluding special items and sales, excluding surcharge. I will now turn the call over to Tony. Tony Thene: Thank you, John, and good morning to everyone. Before I begin this morning, I want to take a moment to share my condolences on behalf of the Carpenter Technology family to Brian Malloy's family. His sudden passing last week was a tragic loss and a shock to all of us. Brian joined the company in 2015 and through various leadership roles was instrumental in advancing Carpenter Technologies' strategic priorities over the last decade. And on July 1, Brian became CEO, a role he was truly excited to take on. Brian will be forever remembered here as a trusted and respected leader for his commitment to our values, employees and the company's long-term success. Brian was a friend, and he will be sorely missed. As you know from our press release, I was reappointed by the Board of Directors to the role of CEO. To be clear, this is not an interim assignment, and we are not launching an external search for a new CEO. The plan is for me to remain as a CEO for an indefinite period of time. Now on to the business of the earnings call. Let's turn to Slide 4 and a review of our safety performance. We start every quarterly earnings presentation with our safety slide, reinforcing that a 0 injury workplace is our #1 value and our ultimate goal. We believe that superior sustainable operational performance is only possible in a company culture that places the safety of their employees as an unquestionable #1 priority. We ended fiscal year 2026 with a total case incident rate of 1.4. We believe we are one of the safest manufacturing companies in the world, but we will only be satisfied with a 0 injury workplace, a target that we firmly believe is possible. Let's turn to Slide 5 for an overview of our fourth quarter performance. Carpenter Technology just delivered another record quarter, reflecting the continued strong operational execution and accelerating demand across our high-value markets. In the fourth quarter, we generated $206.9 million in operating income, exceeding our previous record set in the third quarter by 11%. The profitability was driven by the SAO segment, which delivered an adjusted operating margin of 37.8% in the quarter, another new record for the business. This margin compares to 35.6% in the prior quarter and 30.5% a year ago. As a result of the expanding margins, the SAO segment reported $229.7 million in operating income, an increase of 10% sequentially and another all-time record for the segment and above the expectation we had set for the segment. Importantly, these record earnings translated directly into another strong cash flow generation quarter. In the fourth quarter, we generated $240.1 million in cash from operating activities and $155 million of adjusted free cash flow. And we continued returning cash to shareholders through our dividend and repurchase programs, executing $45.2 million of repurchases in the quarter, raising the total to $179.1 million for all of fiscal year 2026. Turning to Slide 6 and a closer look at fourth quarter sales and market conditions. In the fourth quarter of fiscal year 2026, sales increased in a strengthening demand environment year-over-year and sequentially. Starting with the aerospace and defense end-use market, sales were up 3% sequentially and up 17% year-over-year. Our sales growth reflects accelerating activity across the aerospace supply chain as OEMs continue to push toward higher build rates. Boeing and Airbus continue to increase production against a backlog of approximately 16,000 aircraft, while engine manufacturers remain focused on securing supply to support both increasing production rates and elevated MRO demand. On their earnings call Tuesday, Boeing stated that they expect to achieve rate 47 per month for the 737 this summer, and they discussed their plans to increase to rate 52 per month in the near term. We see this reflected in the sequential increase in bookings for the aerospace and defense end-use market. And we heard this confidence from customers at the Farnborough International Air Show just last week. Our engine customers report strong demand with many commenting that demand is less of a concern than the capacity needed to meet that demand. Our fastener customers are ramping significantly and discussing with us areas where they need more material sooner. Across the board, our structural customers are expecting demand to accelerate in the coming quarters. For an increasing number of structural customers, we are already experiencing accelerated ordering with extending lead times. At the same time, some structural customers remain cautious in their ordering patterns, but at the same time, acknowledging that they are ordering below expected demand rates. We agree. And as that caution fades and ordering aligns with expected production rates, we expect demand to accelerate even further. In the defense submarket, we continue to see strong demand and urgent requests for material across multiple platforms. Moving on to the medical end-use market. Our sales were up 5% sequentially and down 30% compared to the prior year fourth quarter. This is the first quarter in this fiscal year that medical end-use market sales were up sequentially. Our medical end-use market continues to have solid fundamentals, and we see ongoing improvement in demand across orthopedics, dental and cardiology. This quarter, energy end-use market sales flipped versus the large sequential increase last quarter, down 22% sequentially and 12% year-over-year. The demand from our IGT customers, primarily driven by the growing energy needs of data centers remains strong. As we have said many times, quarterly sales for IGT material will fluctuate due to order timing and production scheduling. Finally, we saw a significant uptick in the sales for industrial and consumer end-use market, up 19% sequentially and 22% year-over-year. This was primarily driven by increasing demand from the semiconductor industry, where our materials are used in critical components in the semiconductor production process. We continue to see strong investment in fabrication facilities, semiconductor equipment and supporting infrastructure. Customer confidence has improved, demand remains robust, and our position is strengthening in this market. In summary, we continue to operate in an accelerating demand environment across our high-value end-use markets. We believe that rate of growth will increase in the near term, specifically in the aerospace and defense end-use markets as airframers continue to increase build rates. Combined with our differentiated capabilities and capacity, this positions Carpenter Technology for meaningful growth, both in the near term and over the long term. Now I will turn it over to Tim for the financial summary. Timothy Lain: Thanks, Tony. Good morning, everyone. I'll start on the income statement summary on Slide 8. Starting at the top, sales excluding surcharge increased 9% year-over-year on 22% higher volume. Sequentially, sales were up 4% on 11% higher volume. The improving productivity, product mix and pricing are evident in our gross profit, which increased to $268.9 million in the current quarter, up 26% from the same quarter last year and up 7% sequentially. Selling, general and administrative or SG&A expenses were $62 million in the fourth quarter, roughly flat year-over-year and down $3.3 million sequentially. The SG&A line includes corporate costs, which were $28.6 million. This is up $1.3 million sequentially and up $1.7 million from the fourth quarter of fiscal year 2025. For the upcoming first quarter of fiscal year 2027, we expect corporate costs to be roughly in line with our recent fourth quarter. Operating income was $206.9 million in the current quarter, which is 37% higher than our fourth quarter of fiscal year 2025 and up 11% from our recent third quarter. As Tony mentioned earlier, this represents another record quarterly operating income result, breaking the previous record set just last quarter. Moving on to our effective tax rate, which was 20.7% in the current quarter. This quarter's effective tax rate was lower than anticipated, primarily due to discrete tax benefits associated with certain equity awards. Finally, the earnings per diluted share was $3.23 for the quarter. Now turning to more detail on each of the segments, starting with our SAO segment. Net sales, excluding surcharge for the fourth quarter were $607.4 million. Compared to the same quarter last year, sales were up 11% on 23% higher volume. Sequentially, sales were up 4% on 11% higher volume. The net sales increase that is outpaced by the volume increase translates to a lower reported ratio of net sales, excluding surcharge per pound. In other words, a lower average base price per pound, both sequentially and year-over-year. In the past, some have mistakenly interpreted a lower aggregated average base price as an indication of declining prices in the portfolio. For those of you newer to the story, it's important to remember that the average base price per pound for the SAO segment in any given quarter is highly dependent on the mix of products. As in previous quarters, the decline in average selling price in the recent quarter is due to the higher proportion of lower-priced products in the mix of materials that we shipped in the quarter. Importantly, the lower-priced products often come with comparable average profit margins. That is clearly evident in SAO's adjusted operating margin for the fourth quarter, which increased for the 18th consecutive quarter to a new record level of 37.8%. The continued margin expansion reflects the SAO team's ability to actively manage our production schedules, increase productivity at key work centers, manage costs and execute thoughtful planned maintenance activities. As we have said many times before, quarterly operating margins may be impacted by a number of short-term factors, most notably product mix. That said, clearly, operating margins remain on an upward trajectory, supported by our core drivers, including productivity, mix and pricing. As a result of the higher sales and expanding margin, SAO reported operating income of $229.7 million in the fourth quarter, a new all-time high for the segment. As we look ahead to our first quarter of fiscal year 2027, we anticipate SAO will generate operating income in the range of $218 million to $222 million. This implies an impressive 28% to 30% increase from SAO's first quarter of fiscal year 2026. The outlook considers the elevated preventative maintenance levels that traditionally occur in our first fiscal quarter. The preventative maintenance, while reducing the amount of operating time in the quarter is required to keep our assets healthy and running effectively over the long term. As in previous years, we will offset a portion of the loss in operating time with improved productivity and portfolio optimization. Now turning to Slide 10 and our PEP segment results. Net sales, excluding surcharge in the fourth quarter of fiscal year 2026 were $98.2 million, up 1% year-over-year and 8% sequentially. We saw sales increase across most of our end-use markets sequentially, most notably our titanium products in the medical end-use market. As Tony mentioned earlier, our medical end-use market continues to have solid fundamentals, and we are continuing to see improving demand. In addition, our additive business continues to deliver year-on-year and sequential sales growth driven by aerospace and defense demand. PEP reported operating income of $7.1 million in the current quarter compared with $6.7 million in the third quarter of fiscal year 2026 and $11.7 million in the same quarter a year ago. We currently anticipate the PEP segment's operating income for the upcoming first quarter to be between $6 million and $7 million. Before we move to cash flow, I want to pull together the pieces that make up our outlook for operating income for the first quarter of fiscal year 2027. We anticipate total operating income of $195 million to $200 million. This includes SAO $218 million to $222 million, PEP at $6 million to $7 million and corporate costs of approximately $29 million. Our guidance for the first quarter of fiscal year 2027 implies delivering operating income that would be 27% to 30% higher than last year's first fiscal quarter, which was then a record best first quarter. Now turning to the next slide to talk about our cash generation and capital allocation priorities. In addition to the strong earnings performance, we've generated meaningful cash flows driven by higher earnings and ongoing efforts to manage working capital closely, particularly inventory. In fiscal year 2026, we generated $605 million of cash from operating activities, a 37% increase over fiscal year 2025. The cash generated from operations more than supports the $242.7 million in capital spending in fiscal year 2026. The capital spend includes the brownfield capacity expansion project. As anticipated, capital spending ramped up in our recent fourth quarter, totaling $85.1 million as activities around the capacity expansion project accelerated. A brief update on this project. The brownfield capacity expansion remains on budget and on schedule to be completed by the start of fiscal year 2028. The construction phase is well underway with key equipment being delivered and on-site assembly and installation progressing. And the project remains focused on not only completing construction and installation of equipment, but also preparing for a smooth start-up of operations. With those details in mind, we generated $362.3 million in adjusted free cash flow in fiscal year 2026, ahead of what we had anticipated. We continue to execute our balanced capital philosophy that includes investing cash in attractive and accretive growth projects like the brownfield capacity expansion and returning cash to shareholders. To that end, we continue to execute against our repurchase authorization and repurchased $179.1 million of shares in fiscal year 2026. This brings the total to $281 million spent to date against the $400 million authorization that we announced in July of 2024. And in addition to the buyback program, we also continue to fund a recurring and long-standing quarterly dividend. Finally, our ability to deploy capital is also supported by our healthy liquidity and strong balance sheet. As of the most recent quarter end, our total liquidity was $892.4 million, including $393.3 million of cash and $499.1 million of available borrowings under our credit facility. Our credit metrics remain very strong with our net debt-to-EBITDA ratio remaining well below 1x. Altogether, we believe our strong balance sheet and outlook for significant cash generation positions us well to fund continued growth and deliver significant shareholder returns. Before I turn the call back to Tony, I want to highlight that as we have done in the past, we have included a slide in the appendix of this presentation that includes selected guidance to help model our anticipated fiscal year 2027 results. With that, I will turn the call to Tony. Tony Thene: Carpenter Technology just delivered another significant record-breaking year of profitability. For fiscal year 2026, we generated $702 million in adjusted operating income, a 34% increase over fiscal year 2025 and more than 5x fiscal year 2023. It is clearly a testament to our focus on execution, backed by a strong market position, broad solutions portfolio and unique capabilities that we were able to deliver another record-breaking year. In addition, with the record earnings and disciplined working capital management, we generated $362.3 million in adjusted free cash flow, including investment in the brownfield expansion project, and we continue to return cash to shareholders. Over the course of the fiscal year, we executed $179.1 million in share repurchases in addition to $40.3 million in dividends. And we believe our current record results are far from our peak. The same dynamics that drove our success in fiscal year 2026 are only strengthening as we look ahead over the next several years. With that, let's turn to the next slide for our outlook. At the outset, I want to emphasize that our approach to target setting remains the same. We believe in setting targets that we have a high level of confidence we can achieve based on what we can see today. At the same time, our team always focuses on identifying opportunities to exceed the commitments we make. With that in mind, let's start with the near term. As Tim detailed, we are projecting a strong start to fiscal year 2027, with operating income projected between $195 million and $200 million. For the full fiscal year 2027, we expect between $850 million and $880 million of operating income. That represents approximately 21% to 25% growth over our record fiscal year 2026 performance and continues what we believe is one of the strongest earnings growth trajectories within our industry. Importantly, this outlook is supported by anticipated strengthening demand across our most important end-use markets. Looking beyond fiscal year 2027, we expect our strong growth momentum to continue. Our fiscal year 2029 operating income target of approximately $1.2 billion to $1.3 billion reflects both the continued strength of the projected underlying demand environment and the contribution from our brownfield expansion project. Notably, the fiscal year 2029 target represents more than a 20% 3-year CAGR on our record fiscal year 2026 operating income, a number that we believe sets us apart from our industry peers. And we do not believe fiscal year 2029 represents the peak of our earnings power as the brownfield projects will still be ramping production while the underlying demand environment continues to strengthen. Now let's talk about cash generation. Over the last several years, we have demonstrated the ability to convert earnings into cash. For fiscal year 2027, we anticipate between $400 million and $430 million of adjusted free cash flow. Note that level of cash generation includes the remaining investment in our brownfield expansion project that we expect to be completed in early fiscal year 2028. Looking beyond fiscal year 2027, we expect cash generation to continue increasing as earnings expand and the brownfield project contributes to profitability. That brings me to capital allocation. I think it's important to clearly state that our balanced capital allocation philosophy remains unchanged. That is we are focused on maintaining a balance between investing for growth and returning cash to shareholders. First, we will continue investing in the business. Second, we remain committed to returning capital directly to shareholders. We have a long-standing dividend that reflects the strength and consistency of our cash generation. In addition, to complement the quarterly dividend, we continue to execute against our share repurchase program. The strength of our earnings growth, cash generation and balance sheet gives us the ability to invest for future growth while simultaneously returning meaningful capital to shareholders. When you step back and look at the outlook we've provided today, we believe it represents one of the strongest growth profiles in our industry. And as we have done in the past, we will work not only to meet these impressive targets, but exceed them. Now let's take a step back and summarize this great story. Fiscal year 2026 was another year of record financial performance and demonstrates the strength of our strategy, a strong market position and our team's ability to execute. We delivered record quarterly profits with fourth quarter operating income increasing 37% year-over-year and driving operating income to a record $702 million for the full fiscal year. Within our Specialty Alloys Operations segment, adjusted operating margins continued to expand and reached 37.8%, highlighting the power of our business and the benefits of disciplined execution. We also converted those earnings into meaningful cash generation, producing more than $360 million of adjusted free cash flow during the year, including funding our brownfield capacity expansion. And importantly, we continued returning capital to shareholders, executing approximately $179 million in share repurchases while maintaining our long-standing dividend. As I just detailed, our earnings outlook continues to strengthen, supported by the same drivers that have fueled our success over the last several years, productivity improvements, product mix optimization and favorable pricing actions. For fiscal year 2027, we expect operating income to be substantially higher than our record fiscal year 2026 performance while continuing to generate significant cash flow. Looking beyond fiscal year 2027, our brownfield capacity expansion project will begin contributing in fiscal year 2028, providing an additional accelerator to our earnings growth profile. And by fiscal year 2029, we expect operating income to reach approximately $1.2 billion to $1.3 billion. That's a 20% plus CAGR over 3 years, a rate that we believe exceeds most in the industry. Just as importantly, we do not view fiscal year 2029 as the peak of our earnings power. The market dynamics we've discussed today are expected to continue to strengthen and the brownfield expansion will still be in the early stages of its contribution. Finally, we believe Carpenter Technology offers an attractive long-term investment opportunity. We are operating in an accelerating demand environment across many of the most attractive end-use markets in the world. Our portfolio consists of highly specialized solutions serving critical applications where performance matters. qualification cycles are long and the barriers to entry are significant. We have built a unique collection of manufacturing assets, process technologies, metallurgical expertise and customer relationships that we believe are extraordinarily difficult to replicate. In addition, our strong balance sheet and growing cash flow generation provide us with the flexibility to maintain a balanced and disciplined approach to capital allocation. We will continue investing in profitable growth opportunities, including our brownfield expansion project. We will continue supporting our long-standing dividend, and we will continue returning excess capital to shareholders through our share repurchase program. When you put all those elements together, the investment proposition is straightforward. We are delivering record results today. We have a clear path to significant earnings growth in the years ahead, and we remain committed to creating meaningful long-term value for shareholders through disciplined execution, continuous improvement and profitable growth. Thank you for your time, your interest and your continued confidence in Carpenter Technology. Operator: [Operator Instructions] Your first question from the line of Scott Deuschle of Deutsche Bank. Scott Deuschle: Tim, can you share what the FY '29 EBIT guide assumes with respect to the brownfields contribution to earnings? Timothy Lain: Yes, Scott. So let me talk a little bit about just reaffirm some of the stuff we've already said about the brownfield project. In our prepared remarks, we said it's on track, on schedule, on budget. It comes online early fiscal '28. And then through '28, we expect to ramp up production of that new -- of those newer assets. And in '28, we expect it to be OI incremental. So that's a big deal for a project like that. And then the next milestone we set when we announced the project was in 2030, it would contribute roughly $150 million of incremental OI. So '29, you referenced the EBIT guide, we gave a '29 number. It won't quite be linear between that first year and the $150 million in 2030. We'd expect it probably actually to be a little bit more weighted towards the '30 number, but that's all baked into the current guide. Scott Deuschle: Okay. Is the $150 million in 2030 still the right number? Or is it biased higher given how pricing has trended since you introduced that guide? Timothy Lain: I mean, since we announced -- Scott, I would say it's fair to say that we are more confident in those numbers, and we would expect could drive higher. But I think for now, we're going to keep the $150 million out there for 2030. Scott Deuschle: Okay. And then Tony or Tim, can you parse out the 23% SAO volume growth in the quarter by end market? Timothy Lain: Yes, Scott, I mean, you can see that there was a lot of growth from a volume perspective in our industrial and consumer business sequentially. That leads to, okay, what I talked about on the call, this average price per pound. That's not necessarily a negative. That just means we ship more volume of some of the lower-priced material, but it carries an overall attractive margin profile. So that's why we saw the margin growth in SAO in the quarter. Scott Deuschle: Okay. And my last question is for Tony. And the thing I'm just a bit confused by is the business has been accelerating EBIT growth in each of the last few quarters, but the guide for the first quarter and for 2027 as a whole implies that this EBIT growth begins to moderate a bit, still very strong, but moderates. And I'm a bit confused by that because it seems like the A&D demand presumably is still very strong, A&D volume growth should still be very strong and the pricing backdrop seems to me is only getting better. And so why would the EBIT growth moderate from here as opposed to accelerate in that backdrop? Tony Thene: Scott, I appreciate your question. I don't necessarily disagree with you on that. I think from our standpoint, our goal is always to have guidance is right out in front of us. I'll say this, if you want to take that guide and say that's the floor for FY '27, you wouldn't get any pushback from me. Operator: Your next question from the line of Gautam Khanna of TD Cowen. Gautam Khanna: My condolences to all of the people connected to Brian, that's a real tragedy. Of course. And we're very lucky to have you back in the seat, Tony. So thanks for doing that. Tony Thene: Thank you. Gautam Khanna: I wanted to ask a couple of questions. On the comment of OI accretive in '28 and not being linear, just to be clear, Tim, were you trying to say that it will be closer to the $150 million, not closer to the barely breakeven? Is that what you meant to say? So north of $75 million or something. Timothy Lain: Yes, not quite the midpoint between those 2, but more towards the $150 million, yes. Gautam Khanna: Okay. Cool. Tony Thene: Gautam, if I can say, it gets difficult on that projection, right, because you heard Scott earlier talk about, well, is the $150 million now a bit dated. And of course, the pricing is higher. But as we run through qualifications as well, we're not 100% sure of the exact mix of those products. So that's why we're a bit hesitant to just put on some type of higher price on those products. We don't believe I should put a target out there that we hope to hit. We think we should put one out there that we have confidence in. So that's why you see us maintaining that $150 million because at this point in time, we just don't know 100% what the exact mix of products we run across those assets. Gautam Khanna: That's very helpful. And maybe, Tony, just as you thought about guidance for '27 and also for '29, but for '27 more immediately, what do you anticipate in terms of the contributors to that operating income growth maybe in order of rank. So price, volume, productivity, mix, I guess, productivity and volume are very related. But how would you rank order those? Is price the biggest driver? I'll let you off. Tony Thene: Yes. No, it's a good question, Gautam. Maybe I'll give you a direct answer and maybe a little commentary just on guidance in general. But we talk about price mix, volume, probably the biggest, most significant input to FY '27 is the build rate that Boeing and Airbus is going to hit, right? I mean that's the biggest input that all of us have. Now we've made assumptions to that, but that's the biggest input. And then if you take a step back, certainly, price is going to be a big driver for us, but also volume, as Tim talked about volume in some of the non-aerospace markets, volume is going to come and be a significant tailwind as well. It has to be -- you're still at build rates that are much less to where they want to be. And the comments I made in my prepared remarks, you still have some structural customers, Gautam, that are still not ordering at the levels that they acknowledge they should be ordering at. Let that sink in for a minute. So I think it just magnifies any type of significant uptick in ordering and volume when that does hit, and that will be in this fiscal year for us, of course. So I think that's -- all those are going to be major drivers. And you know us well enough, you've covered us a long time. Productivity is always a big factor for us. We are never satisfied where we're at today. And as you look at our plans for this fiscal year, there is a healthy dose of productivity actions that we have in there. Gautam Khanna: That's helpful. And last one for me before I turn it over. Just if you could walk through kind of some of the submarket order rates and maybe sales growth rates, engine, fasteners, structural.... Tony Thene: Yes, I'll do that. And maybe I just want to take a step back because I do want to come back to this guidance piece and what it should be, what it shouldn't be. Gautam, I think it's important to understand myself and my team, we all understand that everybody has a model and everybody has corresponding expectations. And of course, I would say the reaction to earnings guidance, you must consider the personality of the company that's giving that guidance. And I mean, what do I mean by that? I mean, Corporate Technology provides guidance not that we hope we can achieve, we believe in setting targets that we have a high level of confidence in and what we can see today and then immediately starting to say what I have as far as plans in place and then what I can do to overachieve them. And again, you've covered us long enough to know that we are very disciplined from an operational standpoint, commercial standpoint, and we've proven quarter-over-quarter. The proof is in the numbers. So I would argue those are the 2 factors are the reason that we've consistently overachieved what we put out there as targets. So as I said to Scott, if you want to consider FY '27 to floor, you won't get any pushback from me because we're already focused on overachieving that. And I think before we get too far out ahead of ourselves, and Gautam, I think you had mentioned this, let's just keep in mind what the guidance we just gave, right? I mean that guidance we just gave is 25% higher than our record fiscal year 2026. And as you noted in your note, probably the strongest earnings growth trajectories in the industry. So through all this noise, I'm proud to say we've got a team that's going to put their head down, and we're going to deliver quarter after quarter. We're going to do it the right way. We're going to do it in a sustainable way. And I think that operational discipline paired with an aerospace demand environment that appears to be poised to expand significantly over the next couple of years, that should yield substantial shareholder value. So I guess that was a long-winded way of saying, Gautam, the bottom line for me is I wouldn't bet against this. Gautam Khanna: Understood. And the submarkets, color, if you have it? Tony Thene: I do. Just as a highlight, I'd say, hey, listen, from an overall aerospace standpoint, as you saw on our slide, up 3% sequentially, 17% year-over-year. That was the highest quarter all time for aerospace for us. So that's an important point to make. And if you look at FY '26 in total, that was an all-time high. You did that while Boeing was working to regain its footing and Airbus wasn't where it wanted to be. So it kind of pairs to what I just said from a volume standpoint, there's still a lot more to come there. Now to your specific question, you waited long enough. The submarket details, aero engines was up almost 30% year-over-year. It was down a bit sequentially, low single digits, just that was on a sequential quarter before was a very strong one. But even with that, it was the second highest in history. So a very -- another strong aero engine sales quarter. I know you always ask about aerospace fasteners. They were up 10% sequentially, 12% year-over-year. If you take that bucket where it's almost got the non-fastener, non-engine, so that structural distribution bucket that we've talked specifically about those customers, that was up again significantly this quarter, up 25% quarter-over-quarter, 8% year-over-year. And I know there was some maybe confusion last quarter about how does that all balance out. You've got -- aero engine was down slightly. Defense was also down sequentially about 10%, and that's normal. That's related to the specific nature of this submarket and how it's built on very program specific. Hopefully, that helps you Gautam. Operator: Your next question from the line of David Strauss with Wells Fargo. David Strauss: My condolences as well on Brian's unfortunate passing. So your aero and defense for you guys grew 15% ex surcharge in '26. You mentioned 17% in Q4. What do you -- does that growth rate you think accelerate in '27 relative to '26? Tony Thene: Yes, that's a good question. I mean, of course, we see aerospace being meaningfully higher in FY '27. I mean, as you all know, you've been around longer. You know it has to be higher with the build rates that Boeing and Airbus wants to hit. Is it exactly that same growth rate? I think you could argue that, that would be the case. The reason I'm hesitating a bit, obviously, it depends on the success primarily of Boeing and when they can get to that next level and then the level after that. David Strauss: Okay. And would you think within that, that structures would -- structural would outgrow engine, just given it sounds -- based on your prior comments, it sounds like you're a bit just kind of capacity constrained on the engine side until the brownfield comes online. Tony Thene: Yes. I don't -- I mean there's still -- we've still got some room that we can work with primarily from a productivity standpoint, the accomplishments we're making quarter-over-quarter. But I think you could see a situation where the growth in structural will lead the pack only because it's been so depressed here recently, right? So there is a big recovery that's needed. We've seen this many, many times, right? We saw it just a couple of years ago when Boeing had the issue with Alaskan Airlines, you had the strike. You saw the same thing happen. So I think you're going to see structural. When that does turn the corner and you see that ordering pattern pick up, it's going to be significant. David Strauss: Okay. And then last one, rather than focus on kind of the EBIT number for SAO what's the right way to think about kind of incremental margins from here or margin improvement? I mean last year, margins improved 600 -- something like 600 basis points, incremental were close to 100%. I mean, I know you've made it clear the guidance is very conservative for this year. But I mean, it would imply, I think, that incremental closer to like 50%. I'm just trying to kind of think about given all the moving pieces here in terms of the price per pound that we calculate, all these various different things, like what do you think about kind of the incremental margin level for Specialty alloy, that business, what it should look like from here? Tony Thene: No, it's a good question. And I can tell you now, this isn't the floor for us. I mean, we do believe that we've got opportunities to move higher. Now it certainly gets tougher and tougher, the higher you get, obviously. And as you stated before, I'm really not going to start forecasting our quarterly operating margins are, but we believe there's a lot more growth for us to go -- to have going forward, especially some of the work we're doing around productivity is pretty significant. So I think as we get a couple of quarters into FY '27, we'll see how that lays out. But we still expect very good performance from that standpoint. Operator: Your next question from the line of Bennett Moore with JPMorgan. Bennett Moore: This is to the team and Brian's family. I wanted to start with some of your commentary on the cautious ordering from the structural customers. And I guess, based on your conversations with those customers, what do you feel is really contributing to this? Or said another way, what are these customers looking for to move off the sidelines? Is it really just the next leg hire in Boeing's ramp? Or is there other things in the market they're looking for? Tony Thene: No, I think that's the main thing. And by the way, Bennett, thank you for your comments. That's the primary driver. They've had a history of maybe being burned in the past. A lot of it depends on the individual metrics of that company and what they grade themselves on that they might be a little bit more cautious. So there's not just one answer to that. But yes, I think as you see Boeing continue to improve as they are, I don't think that ordering pattern will be gradual. I think it will be -- when that time hits here in the next quarter or 2, I think you'll see a significant uptick. If history is any indication of what's going to happen, you'll see that significant uptick. Bennett Moore: Understood. And then space has become a growing area of interest. I'm interested in your latest thoughts on the opportunity there. And if you could remind us how your exposure is split between SAO, PEP and I guess, within SAO, to what extent do these products compete for time on the asset with engine alloys? Tony Thene: Yes, it's a good question because we do have both SAO and PEP selling to the space market. On the PEP side, it's primarily our additive business, and that's quite strong right now. On the SAO side, yes, that space could potentially compete with aero engine alloys. There are some similarities there, not 100%. And again, that tonnage right now is very low compared to engines, but that could compete on similar assets. Bennett Moore: And then my last one real quick is in the past, you guys guided to, I believe, a 90% free cash flow conversion for the prior FY '27 free cash flow guidance. I'm wondering if this is still applicable and also, Tim, how we should think about CapEx cadence through the year? Timothy Lain: Yes, Ben, in '26 and the number we provided for '27, there are growth investments in the reported adjusted free cash flow. But when you look at those and say, take the growth investments out, we've demonstrated that we can hit that 85% to 90% type conversion ratio, both in '26. So we demonstrated that and then what we've projected for '27 and the guidance we provided. And then going forward, as that -- as the large growth project right now wraps up and we bring that online in '28, on a go-forward basis, we'd expect those kinds of conversion rates. Still continue to maintain our balanced capital allocation. But given the growth in profitability that we've laid out and our focus on managing working capital, we think that's more than attainable in the future, too. Bennett Moore: And the CapEx cadence, please? Timothy Lain: Yes, sorry, CapEx cadence. I mean given the project, the brownfield project is pretty much in full swing, a lot of activity there, a lot going on. I would expect that it would be fairly ratable throughout the year. Operator: Your next question comes from the line of Josh Sullivan with JonesTrading. Joshua Sullivan: I want to extend thoughts to Brian's family and Carpenter. He's a great asset and importantly, a good guy. Tony, just wanted a clarifying point on the guide for '29. Does that guidance assume those cautious customers have come back and are pulling at anticipated build rates at that point? I know it's up in '29, but just curious what contribution you're thinking about from those more cautious players. Tony Thene: Yes. I think it's going to be -- they'll get more aggressive quite a bit earlier than FY '29. So the answer is yes. Joshua Sullivan: Okay. And then just on Dynamet, as aerostructures picks up and medical looking a little bit better, what is the cadence in the Dynamet margin profile look like between now and '29? Tony Thene: Well, that's a good question. I mean, obviously, Dynamet, we see it as a strategic asset. But at the same time, it's a very small portion of our overall operating income. I mean, SAO is 95% plus of our segment operating income. So it is -- again, we see it as very strategic, but it's very, very small. At the same time, I see Dynamet over the next 2 to 5 years being a bigger contribution to overall operating income. We flipped Dynamet. It used to be probably 60% aerospace. It's probably flipped and become more of a medical business than aerospace, that 60-40 has split. So again, relatively small now and not a big driver to our overall guidance for FY '27, to be honest, really not that much of a driver to FY '29, although we have ticked that up going forward. I think there's a lot of opportunity there, Josh, for us to take that to the next level. Joshua Sullivan: Okay. And just any update on Athens? To your point on the call, Carpenter is always great at overachieving and efficiency and productivity. Are you finding any potentially upside production opportunities or ancillary expansion opportunities as you put Athens together, the brownfield... Timothy Lain: Well, as Tony said this earlier, I mean, I think we think there's always opportunity. But I also say this project that we're working on the Brownfield project is a pretty complex project. So -- and we're managing that project. Within that project, we're always finding, hey, there's pluses or minuses we could potentially change some design here or there. But given the complexity of it, Josh, it's not necessarily -- those aren't necessarily big opportunities. But as we finalize and get -- we're, call it, 12 months away now from bringing that online, I think there's going to be some things that we'll find along the way, and we'll talk about that as we go. But it's such a complex project and it's such a big deal for us that we don't really want to veer too far off from getting that project done, if that makes sense. Operator: Your next question from the line of Andre Madrid with BTIG. Andre Madrid: Condolences to everyone. Could you maybe just talk a bit more about what's implied in your FY '29 outlook at a submarket level, just looking at engines, fasteners, medical and then maybe even further to the extent that you can, aftermarket and OE. I know that is a little bit -- it gets a little grayer at that point. But just really trying to understand the moving pieces to the '29 numbers, especially given that concerns these days are mounting around accelerating retirements and whatnot. Tony Thene: Well, I don't have any concerns at all about the mix between OEM and MRO or aftermarket in FY '29. We've talked about that extensively. There's been other people in the industry, very experts talk about that in the industry. So there is no concern about that. And I think it's premature for me to talk about in detail what's in the FY '29 number. You should assume that we see all of our markets increasing going forward in FY '29 because we have all of these -- we're in the right markets, the high-value end markets. All the macro demand signals are pointing very positive. So all of our markets, we expect to be higher in FY '29. Remember, with aerospace and medical, IGT, you're well over 80% of our revenue and all of those are projected to be very strong going into FY '29 and beyond, and we have the same viewpoint. Andre Madrid: Got it. And then I guess, looking again still at FY '29, you've said it's at the peak of earnings. I mean, is that on a margin or a nominal earning basis or both? And maybe additionally, if it is on margin, what do you truly view as maybe the high watermark for margins? Tony Thene: Andre, you thought you might get me at a weak moment and I tell you what the margin is in our model. But I would say to the first part of your question is both, right? As we look past FY '29, we usually go out 5 years for us internally, and we see growth. That's why we're able to say we see -- we're confident we see growth beyond FY '29. Andre Madrid: Got it. Got it. And then I guess just longer-term capital deployment, I mean, you're almost at $900 million total liquidity now. I can only imagine by FY '29, I'm not going to ask specifics, but like obviously, the cash on hand will continue to grow as well. I'm curious, is M&A on the table at all? And if so, what does the process look like? I'm just curious to see if maybe beyond organic investments and growth you guys are looking inorganically. Tony Thene: Well, of course, I mean, you would guess that a company like us, we get all of the notices whenever something is "available," and we do our research on all of those. So I'll never say no. But when you have such attractive organic projects or possible projects in front of you, it's hard to rank an M&A opportunity higher than that. I mean it just gets -- when I can control my own destiny and do what I'm doing internally, I mean, the risk profile is much better for me. That's not a no, but it's just a tough one to make that work. I don't want to just -- I don't want to buy M&A or buy something just to buy something. And I think the important point here is what you said earlier, you see a significant amount of cash generation going forward, right, for FY '29. If you look at that $1.2 billion to $1.3 billion, that's 3 years out. Someone would ask, do you think that number could be higher? Of course, it could. It very easily could be higher based on what the build rates are. And then you put that type of cash conversion number on that, that's a significant amount of cash. And that's the reason why we repeated 3 or 4 times in this call that we're going to have a balanced capital allocation process. So there are still growth investments we can make in our core markets, maybe some of our smaller markets as well at a much lower level that doesn't disrupt the supply-demand balance that we can work on. And it tells you that we're going to be committed to returning cash to shareholders. You should expect that in any given time, we'll probably have some type of share repurchase program in place. We're always going to have the dividend. So it's a good situation to be in to have that amount of cash that you believe you're going to be able to generate and then have a very strong philosophy to be very balanced in how you take care of that cash. Operator: [Operator Instructions] Your next question comes from the line of Gautam Khanna of TD Cowen. Gautam Khanna: Just a quick couple of follow-ups. One, I wanted to ask if lead times have changed much at all on engine or other products. Tony Thene: Yes, lead times are relatively consistent quarter-over-quarter. There are some specific products that you see that pushing out. Again, we cap that, as you know, we're not taking orders 2 years out. But I would see that, that's going to accelerate quite a bit here over the next quarter for sure over the rest of this calendar year. Gautam Khanna: Okay. Great. And then, Tony, I know in the past, sometimes you've given color on long-term agreements that come up for renewal and kind of the magnitude of price hikes associated with those. I was wondering over the next year or 2, are there a number of LTAs that come up for renewal again? Any way to kind of frame that for us, percentage of business that kind of on the LTA side that gets repriced again between now and 2029. Tony Thene: It's an excellent question, Gautam. I won't give you -- I will disappoint you and say I won't give you the exact percent of what comes up. But I will say there are a couple of very significant contracts that will come up for renewal over the next 2 years, and I will go as far as saying there's one that we're -- a large one that we're currently working on now. So yes, there's still opportunity there. Timothy Lain: And just -- I mean, one more point on that, too, Gautam, in addition to those bigger contracts, there's always -- talked about this before, always a bit of a churn. So there's always contracts coming up for renewal. There's no magical. They all roll over on this date. So there is a constant refresh. Gautam Khanna: I guess one of the things I was curious about as a follow-up to that is way back in the day, I remember Carpenter sometimes entered into 10-year contracts. Are any of those still in the book of business? Or are these that are coming up stuff that has been already renewed since COVID? So you wouldn't see this massive kind of reprice due to inflation that has to get caught up? Like do you still have any of those 10-year wins on the books that were pre-COVID that are coming up? Tony Thene: I'll give you one more answer. Yes. Gautam Khanna: Okay. Good. Tony Thene: And we already have some that are turning over as well because of the shorter duration. We have some that we're working on now that's the second time. If you start the clock in 2021 or 2022, let's say, 2022, Gautam, we have some that we're doing the second term is that one. Gautam Khanna: Is there any -- I'm sorry, I'm asking too many questions. But I am curious, like in the LTA book, is there any way to dimensionalize the percentage of those that are coming up for renewal that are pre-COVID terms, if you will, that are still to be renewed versus ones that are coming around for their second renewal. Tony Thene: I would say it's not significant, right? It's not significant. We've moved most of those out. But the reason I said one answer, yes, because I didn't -- I was hoping you wouldn't ask for more follow-up, but I should have expected that from you that yes, there's still 1, maybe 2 that's pre-COVID. Operator: Your next question from the line of Scott Deuschle of Deutsche Bank. Scott Deuschle: Yes. Just to follow up on that, Tony, can you share how your share position has changed or not changed on newer LTAs, particularly with the large engine manufacturers? Not asking on any specific customer, but just on balance across the recent LTAs you signed, how has your share trended? And to what extent does it even matter if you're sold out? Tony Thene: Well, what you just said at the end is the most important comment. But I will tell you this, that every contract in the aerospace side that we're working on, they ask for more and more material. Not less. Scott Deuschle: Okay. And your share of that material is generally holding in? Tony Thene: Well, that's what I'm talking about our share, right? So I'm saying whatever the past -- usually the contractor some percent of their needs, they are wanting more that percentage to be higher and higher with each contract. Operator: This concludes our Q&A session. I will now turn the call back to John Huyette for closing remarks. John Huyette: Thank you, operator, and thank you, everyone, for joining us today for our fiscal year 2026 fourth quarter conference call. Have a great rest of your day. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Carpenter Technology, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Carpenter Technology wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $397,081!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,166,221!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of July 30, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Carpenter Technology (CRS) Q4 2026 Earnings Call Transcript was originally published by The Motley Fool

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Delivered record quarterly operating income of $206.9 million, an 11% sequential increase driven by strong operational execution and high-value market demand. Achieved record SAO adjusted operating margins of 37.8%, marking the 18th consecutive quarter of expansion through productivity gains and product mix optimization. Aerospace and defense sales grew 17% year-over-year, supported by engine manufacturers securing supply for production ramps and elevated MRO demand. Identified a 'cautious' ordering pattern among some structural aerospace customers who are currently ordering below expected demand rates, suggesting a future demand catalyst. Industrial and consumer sales rose 19% sequentially, fueled by robust investment in semiconductor fabrication facilities and infrastructure. Management emphasized that recent margin expansion was achieved despite a higher volume of lower-priced products, proving the profitability of the broader portfolio. Projected FY27 operating income between $850 million and $880 million, representing approximately 21% to 25% growth over record FY26 levels. Established a FY29 operating income target of $1.2 billion to $1.3 billion, reflecting a 20% plus 3-year CAGR from FY26. The Brownfield capacity expansion remains on schedule for completion by the start of FY28, with expectations to be operating income incremental in its first year. Anticipate FY27 adjusted free cash flow between $400 million and $430 million, even while funding the final stages of the capacity expansion project. Management views the FY27 guidance as a 'floor,' assuming conservative build rates for major aircraft OEMs that could be exceeded. Tony Thene reappointed as CEO following the sudden passing of Brian Malloy; the company confirmed this is not an interim role and no external search is active. Executed $179.1 million in share repurchases during FY26, with $119 million remaining under the current $400 million authorization. Maintained a net debt-to-EBITDA ratio well below 1x, providing significant liquidity of $892.4 million to fund growth and shareholder returns. Confirmed that while M&A is monitored, the company prioritizes organic growth projects due to their superior risk profile and higher return potential. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. The project is expected to contribute approximately $150 million in incremental operating income by 2030. Management noted that FY29 contributions will be weighted toward the 2030 target rather than being a linear ramp from the FY28 start date. Current caution is attributed to customers' internal metrics and past history of being 'burned' by supply chain shifts. Management expects a significant, non-gradual uptick in ordering within the next one to two quarters as Boeing continues to stabilize. Several significant contracts are up for renewal over the next two years, including one large contract currently under negotiation. Confirmed that a small number of pre-COVID, 10-year contracts still remain to be repriced, offering further margin tailwinds. Aerospace customers are consistently requesting higher share-of-wallet and more material in new contract discussions. Targeting an 85% to 90% free cash flow conversion ratio once major growth investments are normalized. FY27 capital expenditures are expected to be 'fairly ratable' throughout the year as the Brownfield project enters full swing.

Track your investments for FREE with Simply Wall St, the portfolio command center trusted by over 7 million individual investors worldwide. Carpenter Technology stock has delivered an extremely strong run over the past five years, yet the latest valuation checks suggest the shares now look expensive rather than like a clear bargain. Over the past 5 years, Carpenter Technology has returned about 1,391%, which sets a very high bar for any further gains to be justified by fundamentals. The key support for the current share price can come from investors’ expectations for ongoing profitable growth, while any disappointment in cash generation or returns on new investment may quickly weigh on what the market is willing to pay. On Simply Wall St's broader valuation checks, Carpenter Technology scores 1 out of 6. This points to a stock that currently leans expensive across several metrics rather than obviously cheap. The issue now is whether Carpenter Technology’s share price still has enough fundamental support after such a strong multi year run or whether the current levels already bake in most of the good news. Carpenter Technology delivered 102.1% returns over the last year. See how this stacks up to the rest of the Aerospace & Defense industry. The P/E ratio is a useful way to anchor Carpenter Technology against its own earnings power and against other aerospace and defense stocks. It tells you how many dollars investors are currently willing to pay for each dollar of earnings. Carpenter Technology trades on about 48.7x earnings. That is above the broader aerospace and defense industry average of roughly 37.9x, yet below the peer group average of around 53.5x. The tailored fair P/E ratio from Simply Wall St's model is about 40.0x. This reflects what might be expected given factors such as Carpenter Technology's sector, size and risk profile. The current P/E sits clearly above that fair level, which implies investors are paying a premium for the stock compared with what this framework suggests would be reasonable. On the P/E multiple alone, Carpenter Technology stock screens as overvalued relative to both its modelled fair ratio and the wider industry benchmark. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives for Carpenter Technology pick up where the P/E discussion leaves off and set out the specific growth, margin and earnings paths that would need to play out for the stock to look meaningfully cheaper or more expensive than it does today. They sit on Simply Wall St's Community page and turn a single valuation output into a series of clear future assumptions that you can revisit later and compare with how Carpenter Technology's actual progress unfolds. The community is split on Carpenter Technology, with one camp seeing plenty left in the story and the other warning expectations have already run hard. Bull case: 28% undervalued Read the full Bull Case to see why Carpenter Technology could be undervalued Bear case: 30% overvalued Read the full Bear Case to see why Carpenter Technology could be overvalued Do you think there's more to the story for Carpenter Technology? Head over to our Community to see what others are saying! The valuation work on Carpenter Technology points to a stock that currently screens as overvalued on market multiples, with a rich P/E that already bakes in a lot of optimism about margins and demand. That does not rule out further upside, but it means the burden of proof now sits with future execution rather than multiple expansion. The key question from here is whether Carpenter Technology can keep delivering the profitability and cash generation that bullish investors expect, or whether any stumble in aerospace and defense volumes or margins prompts the market to rethink how much it is willing to pay. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include CRS. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Interested in Carpenter Technology Corporation? Here are five stocks we like better. Record results: Carpenter Technology reported fiscal Q4 operating income of $206.9 million, up 37% year over year, while Specialty Alloys Operations achieved a record 37.8% adjusted operating margin. Strong demand and outlook: Aerospace and defense sales rose 17% year over year, and the company forecasts fiscal 2027 operating income of $850 million to $880 million, up approximately 21% to 25% from fiscal 2026. Expansion and leadership: Tony Thene was reappointed CEO indefinitely following Brian Malloy’s death. Carpenter said its Brownfield expansion remains on schedule for fiscal 2028 completion and could add roughly $150 million in annual operating income by fiscal 2030. AI Fatigue? These 3 Analyst-Upgraded Stocks Offer Real Growth Potential Carpenter Technology (NYSE:CRS) reported record fourth-quarter and full-year profitability for fiscal 2026, citing stronger demand across aerospace, defense and other high-value markets, continued margin expansion and disciplined operational execution. The company also announced that Chairman, President and Chief Executive Officer Tony Thene had been reappointed as CEO following the sudden death of Brian Malloy, who had assumed the role on July 1. Thene said his appointment was not interim and that the board was not conducting an external search. → Why SK hynix Could Be the Best AI Chip Stock to Buy Now 3 Materials Stocks Everyone Is Talking About Right Now “The plan is for me to remain as the CEO for an indefinite period of time,” Thene said, while offering condolences to Malloy’s family and describing him as a respected leader who had helped advance Carpenter’s strategic priorities since joining the company in 2015. For the fiscal fourth quarter ended June 30, Carpenter reported operating income of $206.9 million, up 37% from the prior-year period and 11% sequentially. The result surpassed the company’s prior quarterly record, set in the third quarter. → Microsoft Just Flipped the AI Spending Narrative Overnight 3 Steel Stocks Could Soar on New China Tariffs Sales excluding surcharge increased 9% year over year on 22% higher volume, and rose 4% sequentially on 11% higher volume, according to Chief Financial Officer Tim Lain. Gross profit reached $268.9 million, up 26% from a year earlier, while SG&A expense was roughly flat year over year at $62 million. Diluted earnings per share were $3.23, while the effective tax rate was 20.7%. Lain said the tax rate was lower than anticipated because of discrete tax benefits associated with certain equity awards. → Carrier Earnings Could Send the Stock to a New All-Time High The company’s Specialty Alloys Operations, or SAO, segment generated $607.4 million in sales excluding surcharge and $229.7 million in operating income, both reflecting strong volume and profitability. SAO’s adjusted operating margin rose to a record 37.8%, compared with 35.6% in the preceding quarter and 30.5% a year earlier. Lain said the segment’s lower average reported base price per pound reflected a higher mix of lower-priced products rather than declining prices. Those products can carry comparable margins, he said, and the segment’s margin expansion reflected productivity gains, production scheduling, cost management and planned maintenance execution. The Performance Engineered Products, or PEP, segment reported fourth-quarter sales excluding surcharge of $98.2 million, up 1% year over year and 8% sequentially. Operating income was $7.1 million, compared with $11.7 million a year earlier and $6.7 million in the third quarter. Aerospace and defense sales increased 3% sequentially and 17% year over year in the fourth quarter. Thene said aircraft manufacturers continue pursuing higher production rates against a backlog of about 16,000 aircraft, while engine manufacturers remain focused on securing supply for both production and maintenance demand. He said aerospace engine sales increased nearly 30% year over year, though they declined by low single digits sequentially following a strong prior quarter. Aerospace fastener sales rose 10% sequentially and 12% year over year, while the company’s structural and distribution category increased 25% sequentially. Some structural customers remain cautious in their ordering patterns despite acknowledging that orders are below expected demand rates, Thene said. He expects a significant pickup once those customers adjust purchases to anticipated production levels. The company also continued to see urgent defense-material requests across multiple platforms. Medical sales rose 5% sequentially but fell 30% year over year. Management said the sequential improvement, the first of fiscal 2026 for the market, reflected improving demand across orthopedic, dental and cardiology applications. PEP’s titanium products also contributed to the sequential medical sales improvement. Energy sales declined 22% sequentially and 12% year over year, reversing a large increase in the prior quarter. Thene said demand from industrial gas turbine customers remains strong, driven primarily by data-center energy needs, but quarterly sales can fluctuate with order timing and production scheduling. Industrial and consumer sales increased 19% sequentially and 22% from a year earlier, led by semiconductor demand. Carpenter said it continues to see strong investment in fabrication facilities, equipment and related infrastructure. For the first quarter of fiscal 2027, Carpenter expects total operating income of $195 million to $200 million. The forecast includes SAO operating income of $218 million to $222 million, PEP operating income of $6 million to $7 million, and corporate costs of approximately $29 million. The company expects full-year fiscal 2027 operating income of $850 million to $880 million, representing projected growth of about 21% to 25% from fiscal 2026’s record $702 million. Thene said pricing, volume and productivity actions are expected to support the outlook, with aircraft production rates representing a major input. Management also reiterated its fiscal 2029 operating-income target of approximately $1.2 billion to $1.3 billion. Thene said Carpenter does not view fiscal 2029 as the peak of its earnings potential, as its Brownfield capacity expansion will still be ramping production and underlying markets are expected to remain strong. The Brownfield project remains on budget and on schedule for completion by the start of fiscal 2028, Lain said. The company expects the project to be operating-income accretive in fiscal 2028 and has maintained its estimate that it could contribute roughly $150 million of incremental operating income in fiscal 2030. Carpenter generated $240.1 million in cash from operating activities and $155 million in adjusted free cash flow during the fourth quarter. For the full fiscal year, operating cash flow increased 37% to $605 million, while adjusted free cash flow reached $362.3 million after $242.7 million in capital spending. Capital expenditures included $85.1 million in the fourth quarter as activity accelerated on the Brownfield project. The company expects adjusted free cash flow of $400 million to $430 million in fiscal 2027, including the remaining investment for the expansion. The company repurchased $45.2 million of shares in the fourth quarter and $179.1 million over the full fiscal year. Total repurchases since Carpenter announced its $400 million authorization in July 2024 reached $281 million. It also paid $40.3 million in dividends during fiscal 2026. At quarter-end, Carpenter had total liquidity of $892.4 million, including $393.3 million in cash and $499.1 million available under its credit facility. Lain said net debt to EBITDA remained well below one times. Carpenter Technology Corporation engages in the manufacture, fabrication, and distribution of specialty metals in the United States, Europe, the Asia Pacific, Mexico, Canada, and internationally. It operates in two segments, Specialty Alloys Operations and Performance Engineered Products. The company offers specialty alloys, including titanium alloys, powder metals, stainless steels, alloy steels, and tool steels, as well as additives, and metal powders and parts. It serves to aerospace, defense, medical, transportation, energy, industrial, and consumer markets. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Carpenter Technology Q4 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

This article first appeared on GuruFocus. Revenue (ex-surcharge): $607.4 million for the SAO segment, up 11% year-over-year and 4% sequentially on higher volume. Operating Income: $206.9 million for the fourth quarter, a new record, up 37% year-over-year and 11% sequentially. SAO Adjusted Operating Margin: 37.8%, a new record, compared to 35.6% in the prior quarter and 30.5% a year ago. SAO Operating Income: $229.7 million, a new all-time high for the segment, up 10% sequentially. PEP Operating Income: $7.1 million in the fourth quarter. Gross Profit: $268.9 million, up 26% year-over-year and 7% sequentially. Earnings Per Share (diluted): $3.23 for the quarter. Cash from Operating Activities: $240.1 million in the fourth quarter; $605 million for the full fiscal year 2026. Adjusted Free Cash Flow: $155 million in the fourth quarter; $362.3 million for the full fiscal year 2026. Capital Expenditures: $85.1 million in the fourth quarter; $242.7 million for the full fiscal year 2026. Share Repurchases: $45.2 million in the fourth quarter; $179.1 million for the full fiscal year 2026. Total Liquidity: $892.4 million as of quarter end, including $393.3 million in cash. Net Debt-to-EBITDA Ratio: Remained well below 1.0x. Warning! GuruFocus has detected 6 Warning Signs with KKR. Is CRS fairly valued? Test your thesis with our free DCF calculator. Release Date: July 30, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Carpenter Technology Corp (NYSE:CRS) delivered another record quarter with operating income of $206.9 million, up 11% sequentially and 37% year-over-year. The SAO segment achieved a record adjusted operating margin of 37.8%, marking the 18th consecutive quarter of margin expansion. The company generated strong cash flow, with $240.1 million from operations and $155 million in adjusted free cash flow in Q4. Management provided a robust FY2027 outlook, expecting operating income between $850 million and $880 million, representing 21% to 25% growth. The long-term FY2029 operating income target of approximately $1.2 billion to $1.3 billion implies a 20%+ CAGR, supported by the brownfield expansion project. The company experienced the sudden passing of its newly appointed CEO, Brian Malloy, creating a leadership transition. Sales in the energy end-use market declined 22% sequentially and 12% year-over-year due to order timing and production scheduling. The average base price per pound in the SAO segment decreased due to a higher proportion of lower-priced products in the sales mix. Some structural aerospace customers remain cautious in their ordering patterns, ordering below expected demand rates. The PEP segment's operating income is expected to be relatively low, between $6 million and $7 million in the upcoming quarter. Q: Tim, can you share what the FY29 EBIT guide assumes with respect to the brownfield's contribution to earnings?A: Timothy Lain (CFO): The brownfield project is on track, on schedule, and on budget, coming online in early fiscal '28. In '28, we expect it to be OI incremental. The next milestone we set was in 2030, where it would contribute roughly $150 million of incremental OI. For FY29, it won't be linear; we'd expect it to be a bit more weighted towards the $150 million number, and that's all baked into the current guide. Q: And then Tony or Tim, can you parse out the 23% SAO volume growth in the quarter by end market?A: Timothy Lain (CFO): There was a lot of growth from a volume perspective in our industrial consumer business sequentially. This leads to a lower average price per pound, but that's not necessarily a negative. It just means we shipped more volume of some lower-price material, which carries an overall attractive margin profile, which is why we saw margin growth in SAO in the quarter. Q: And the thing I'm just a bit confused by is the business has been accelerating EBIT growth in each of the last few quarters, but the guide for the first quarter and for 2027 as a whole implies that this EBIT growth begins to moderate a bit. Why would the EBIT growth moderate from here as opposed to accelerate in that backdrop?A: Tony Thene (CEO): I don't necessarily disagree with you. Our goal is always to have guidance that's right out in front of us. If you want to take that guide and say that's the floor for FY '27, you wouldn't get any pushback from me. Q: Maybe, Tony, just as you thought about guidance for '27 and also for '29, but for '27 more immediately, what do you anticipate in terms of the contributors to that operating income growth maybe in order of rank? So price, volume, productivity, mix... How would you rank order those?A: Tony Thene (CEO): Probably the biggest, most significant input to FY '27 is the build rate that Boeing and Airbus is going to hit. That's the biggest input. Certainly, price is going to be a big driver, but also volume in some of the non-aerospace markets will be a significant tailwind. You still have some structural customers that are not ordering at the levels they acknowledge they should be ordering at. Productivity is always a big factor for us, and there is a healthy dose of productivity actions in our plans for this fiscal year. Q: Your Arrow in defense for you guys grew 15% ex surcharge in '26, you mentioned 17% in Q4. What do you think, does that growth rate you think accelerate in '27 relative to '26?A: Tony Thene (CEO): We see aerospace being meaningfully higher in FY27. It has to be higher with the build rates that Boeing and Airbus wants to hit. Is it exactly that same growth rate? I think you could argue that would be the case. The reason I'm hesitating is it depends on the success primarily of Boeing and when they can get to that next level. Q: I wanted to start with some of your commentary on the cautious ordering from the structural customers. And I guess based on your conversations with those customers, what do you feel is really contributing to this?A: Tony Thene (CEO): That's a primary driver. They've had a history of maybe being burned in the past. A lot of it depends on the individual metrics of that company. But yes, I think as you see Boeing continue to improve, I don't think that ordering pattern will be gradual. I think it will be when that time hits here in the next quarter or two, you'll see a significant uptick. Q: Could you maybe just talk a bit more about what's implied in your FY29 outlook at a submarket level? Just looking at engines, fasteners, medical, and then maybe even further to the extent that you can aftermarket and OE.A: Tony Thene (CEO): I don't have any concerns at all about the mix between OEM and MRO or aftermarket in FY29. It's premature for me to talk about in detail what's in the FY29 number. You should assume that we see all of our markets increasing going forward in FY29 because we are in the right high-value end markets, and all the macro demand signals are pointing very positive. With aerospace and medical IGT, you're well over 80% of our revenue, and all of those are projected to be very strong. Q: And then I guess looking again still at FY '29, you've said it's at the peak of earnings. I mean, is that on a margin or nominal earning basis or both? And maybe additionally, if it is on a margin, what do you truly view as maybe the high watermark for margins?A: Tony Thene (CEO): To the first part of your question, it's both. As we look past FY '29, we usually go out five years for us internally, and we see growth, which is why we are confident we see growth beyond FY '29. Q: I know in the past, sometimes you've given color on long-term agreements that come up for renewal and the magnitude of price hikes associated with those. I was wondering over the next year or two, are there a number of LTAs that come up for renewal again?A: Tony Thene (CEO): I won't give you the exact percent of what comes up, but I will say there are a couple very significant contracts that will come up for renewal over the next two years, and I will go as far as saying there's one large one that we're currently working on now. So, yes, there's still opportunity there. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

For the quarter ended June 2026, Carpenter Technology (CRS) reported revenue of $851 million, up 12.6% over the same period last year. EPS came in at $3.23, compared to $2.21 in the year-ago quarter. The reported revenue compares to the Zacks Consensus Estimate of $847.78 million, representing a surprise of +0.38%. The company delivered an EPS surprise of +6.6%, with the consensus EPS estimate being $3.03. While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance. Since these metrics play a crucial role in driving the top- and bottom-line numbers, comparing them with the year-ago numbers and what analysts estimated about them helps investors better project a stock's price performance. Here is how Carpenter performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: Volumes Sold in Pounds - Specialty Alloys Operations: 57.45 million versus the two-analyst average estimate of 51.46 million. Volumes Sold in Pounds: 59.58 million versus the two-analyst average estimate of 53.29 million. Volumes Sold in Pounds - Intersegment: -1.13 million versus the two-analyst average estimate of -0.88 million. Volumes Sold in Pounds - Performance Engineered Products: 3.26 million versus the two-analyst average estimate of 2.7 million. Net Sales- End-Use Market Excluding Surcharge Revenue- Total: $679.7 million versus the two-analyst average estimate of $687.41 million. The reported number represents a year-over-year change of +9%. Net Sales- End-Use Market Excluding Surcharge Revenue- Surcharge revenue: $171.3 million versus the two-analyst average estimate of $151.87 million. The reported number represents a year-over-year change of +29.9%. Net Sales- Intersegment: $-28 million versus $-22.51 million estimated by two analysts on average. Compared to the year-ago quarter, this number represents a +21.2% change. Net Sales- Performance Engineered Products: $108.5 million versus $102.58 million estimated by two analysts on average. Compared to the year-ago quarter, this number represents a +3.7% change. Net Sales- Specialty Alloys Operations: $770.5 million versus $762.11 million estimated by two analysts on average. Compared to the year-ago quarter, this number represents a +14.3% change. Operating Income- Corporate: $-28.6 million versus the two-analyst average estimate of $-31.29 million. Operating Income- Performance Engineered Products: $7.1 million versus the two-analyst average estimate of $6.8 million. Operating Income- Specialty Alloys Operations: $229.7 million versus $227.64 million estimated by two analysts on average. View all Key Company Metrics for Carpenter here>>> Shares of Carpenter have returned -13% over the past month versus the Zacks S&P 500 composite's -1.5% change. The stock currently has a Zacks Rank #1 (Strong Buy), indicating that it could outperform the broader market in the near term. 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 Carpenter Technology Corporation (CRS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research