Carpenter Technology lifts first-quarter operating income to $196.4 million and keeps annual outlook

Carpenter Technology Corporation (CRS) said Thursday its operating income for the fiscal first quarter ended Sept. 30 rose 28% from a year earlier to $196.4 million. The company attributed the results to productivity improvements, mix optimization and pricing actions.

The company said in a filing that diluted earnings per share were $3.25, compared with $2.43 a year earlier.

Here's how the company did:

• Earnings per diluted share: $3.25 vs. $2.43 a year earlier
• Revenue: $798.2 million vs. $733.7 million a year earlier
• Operating income: $196.4 million vs. $153.3 million a year earlier
• Net income: $162.5 million vs. $122.5 million a year earlier
• Operating cash flow: $52.8 million vs. $39.2 million a year earlier

Net sales rose 9%, or $64.5 million, to $798.2 million from $733.7 million a year earlier.

Net sales excluding surcharge were $634.8 million, an increase of $31.7 million, or 5%, from the same period a year ago. Raw material surcharge revenue was $163.4 million, up from $130.6 million.

Here's how the company's two reportable segments did during the quarter:

• Specialty Alloys Operations: operating income of $216.3 million, up 27% from $170.7 million, and an adjusted operating margin of 37.7%, up from 32.0%
• Performance Engineered Products: operating income of $7.3 million, down from $9.4 million, and an adjusted operating margin of 8.8%, down from 10.8%

The Specialty Alloys Operations segment, which runs premium alloy and stainless steel mills primarily in Pennsylvania as well as in South Carolina and Alabama, had net sales of $730.4 million, up from $659.6 million.

Performance Engineered Products, which includes the Dynamet titanium business and Carpenter Additive, posted net sales of $91.1 million, down from $93.6 million.

Bookings in commercial aerospace were led by the aerospace structural and distribution sub-markets, which rose 23% sequentially and 49% from a year earlier.

“Notably, in the current quarter we saw a step up in demand, especially in the commercial aerospace supply chain,” said Chairman, President and CEO Tony R. Thene.

Thene also said the quarter was a milestone: “This was the most profitable first quarter in the Company’s history, up 28 percent over the first quarter of fiscal year 2026, establishing a strong foundation for the rest of the fiscal year.”

Operating margin was 24.6%, up from 20.9%. The adjusted operating margin, which excludes raw material surcharge revenue, was 30.9%, up from 25.4%.

Cost of sales rose to $541.9 million from $517.3 million. Selling, general and administrative expenses fell to $59.9 million from $63.1 million. Interest expense, net, was $7.1 million, down from $11.5 million.

Net cash provided from operating activities was $52.8 million, compared with $39.2 million. Higher earnings were partially offset by changes in working capital, primarily inventory.

Free cash flow was negative $24.8 million, compared with negative $3.4 million. Capital expenditures rose to $77.7 million from $42.6 million, mainly for the brownfield expansion.

Total liquidity, including cash and the available revolver balance, was $658.6 million at quarter end. That consisted of $159.5 million of cash and $499.1 million of available borrowings under the company’s Credit Facility.

The company bought 241,924 shares on the open market for $133.9 million during the quarter. As of Sept. 30, $985.0 million remained under the $1.0 billion repurchase program authorized in August 2026.

Cash dividends were $0.20 per share in both periods.

For the second quarter, the company expects operating income of $192 million to $197 million.

For fiscal 2027, the company maintained its operating income outlook of $850 million to $880 million, which it said represents a 21% to 25% increase over fiscal 2026 operating income.

The company also maintained its fiscal 2029 operating income target of $1.2 billion to $1.3 billion. Thene said the company is working on actions to exceed both targets: “In addition, we are currently working on specific actions and projects to exceed our operating income targets for fiscal year 2027 and fiscal year 2029.”

The outlook reflects accelerating demand, continued benefits of pricing actions and the expected contribution from the brownfield capacity expansion project, the company said.

Thene summed up the company’s position: “Altogether, we believe we have a compelling value creation story.”

The results were disclosed in a press release furnished as Exhibit 99.1 to the company’s 8-K.