Key Takeaways:
- Q4 operating income hit $206.9M, up 37 percent year over year on aerospace demand
- SAO segment margin reached record 37.8 percent as volume rose 22 percent
- FY2027 guidance of $850M-$880M implies 21-25 percent growth from fiscal 2026
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Carpenter Technology Q4 operating income jumps 37% to record $206.9M
Carpenter Technology reported Q4 operating income of $206.9 million, up 37 percent year over year, on record aerospace and defense demand.
"The plan is for me to remain as the CEO for an indefinite period of time," Tony Thene, chairman, president and CEO at Carpenter Technology, said. Thene was reappointed after the sudden death of Brian Malloy, who had assumed the role on July 1.
Q4 diluted EPS was $3.23, beating the Zacks Consensus Estimate of $3.03. Revenue reached $851 million, up from $755.6 million a year earlier. The Specialty Alloys Operations segment generated $607.4 million in sales excluding surcharge and $229.7 million in operating income, with adjusted operating margin at a record 37.8 percent, up from 35.6 percent in the prior quarter and 30.5 percent a year earlier.
Aerospace and defense sales rose 17 percent year over year, with aerospace engine sales up nearly 30 percent. The company cited a backlog of about 16,000 aircraft and engine makers securing supply for production and maintenance demand. Medical sales fell 30 percent year over year but improved 5 percent sequentially, the first gain of fiscal 2026. Energy sales declined 22 percent sequentially and 12 percent year over year, while industrial and consumer sales rose 19 percent sequentially and 22 percent from a year earlier on semiconductor demand.
The company guided fiscal 2027 operating income of $850 million to $880 million, up roughly 21 percent to 25 percent from fiscal 2026's record $702 million. First-quarter fiscal 2027 operating income is expected at $195 million to $200 million. Management reiterated its fiscal 2029 target of $1.2 billion to $1.3 billion, with the Brownfield expansion on schedule for completion by the start of fiscal 2028 and expected to contribute roughly $150 million of incremental operating income by fiscal 2030.
Carpenter generated $240.1 million in operating cash flow and $155 million in adjusted free cash flow during the quarter. Full-year operating cash flow rose 37 percent to $605 million, with adjusted free cash flow of $362.3 million after $242.7 million in capital spending. The company repurchased $45.2 million of shares in the quarter and $179.1 million over the full fiscal year, with total buybacks since July 2024 reaching $281 million. Fiscal 2027 adjusted free cash flow is expected at $400 million to $430 million.
Carpenter shares have gained about 68.5 percent since the start of the year, compared with a 6.9 percent rise for the S&P 500. The stock carries a Zacks Rank #1 (Strong Buy) following the earnings beat.
The record quarter and raised outlook show management expects aerospace and defense demand to remain strong through fiscal 2027. Investors will watch the Brownfield ramp and aircraft production rate increases as the next margin expansion drivers.
This article is for informational purposes only and does not constitute investment advice.
