Carpenter Technology : Q3 2026 Carpenter Technology Earnings Conference Call

Published: 2026-04-29 10:06:10 ET CRS

Published on 04/29/2026 at 10:06 am EDT

April 29, 2026

CARPENTER TECHNOLOGY CORPORATION

3rd Quarter Fiscal Year 2026 Earnings Call

3rd QUARTER FISCAL YEAR 2026

Tony Thene | Chairman of the Board and Chief Executive Officer

Safety is Our Highest Value

Total case incident rate

2.2

2.0

1.7

1.8

1.4

1.2

1.3

1.1

1.0

0.6

FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 YTD

Quarter Performance: record operating income and operating margins

Strong execution delivering record quarterly profit

Operating Income ($M)

+20%

187

138

155

Q3 FY25 Q2 FY26 Q3 FY26

Operating income up 20% over Q2

FY26, our previous record

Generated $124.8 million in adjusted free cash flow

SAO continues to expand adjusted operating margins

SAO Adjusted Operating Margin (%) *

33.1

35.6

29.1

Q3 FY25 Q2 FY26 Q3 FY26

SAO operating income of $208.0

million, up 37% year-over-year

Margin expansion from higher productivity, improving mix and pricing actions

Aerospace & Defense demand and pricing continues to strengthen

Aerospace & Defense sales increased 13% sequentially and 17% year-over-year

Accelerating demand with highest Aerospace structural bookings since Q4FY23

Pricing remains elevated and

consistently increasing

*Detailed schedule included in Non-GAAP Schedules in Appendix.

Third Quarter Fiscal Year 2026 Net Sales

MARKET

Q3-26 NET SALES EX. SURCHARGE ($M)*

% NET SALES EX. SURCHARGE

VS. Q2-26

VS. Q3-25

$51.7

MEDICAL

-9%

-29%

$19.3

TRANSPORTATION

+12%

-12%

+8%

+5%

12%

$78.1

INDUSTRIAL & CONSUMER

+44%

+32%

$50.5

ENERGY

+17%

+13%

66%

$435.6

AEROSPACE & DEFENSE

Demand environment strengthening, especially in Aerospace & Defense with build rates ramping

Aerospace demand remains robust, driven by increasing production rates and elevated MRO activity

Accelerating aerospace structural sub-market bookings signaling growing confidence in build rate ramp

New builds of industrial gas turbines (IGT) driving demand in energy market

Medical customers maintain positive outlook with increasing patient procedures

*Excludes sales through Carpenter's Distribution businesses. 6

3rd QUARTER FISCAL YEAR 2026

FINANCIAL OVERVIEW

Tim Lain | Senior Vice President and Chief Financial Officer

Income Statement Summary

$ millions, except per share amounts

Q3-26

Q2-26

Q3-25

SEQUENTIAL CHANGE

YEAR-OVER-YEAR CHANGE

Pounds ('000)

53,474

48,398

46,496

5,076

6,978

Net Sales

811.5

728.0

727.0

83.5

84.5

Net Sales ex. Surcharge Revenue*

655.6

589.1

597.0

66.5

58.6

Gross Profit

251.8

218.3

200.8

33.5

51.0

Selling, General and Administrative Expenses

65.3

63.1

63.0

2.2

2.3

Operating Income

186.5

155.2

137.8

31.3

48.7

Adjusted Operating Margin ex. Surcharge Revenue*

28.4%

26.3%

23.1%

2.1%

5.3%

Effective Tax Rate

21.0%

19.0%

21.8%

2.0%

(0.8%)

Net Income

139.6

105.3

95.4

34.3

44.2

Earnings per Diluted Share

$2.77

$2.09

$1.88

$0.68

$0.89

Adjusted Earnings per Diluted Share ex. Special Item*

$2.77

$2.33

$1.88

$0.44

$0.89

*Detailed schedule included in Non-GAAP Schedules in Appendix. 8

Capital Allocation: Repurchasing shares while investing in brownfield capacity expansion

Year to date FY26, strong cash flow generation...

…While executing against planned

capital allocation priorities…

…And maintaining healthy liquidity

and strong balance sheet

Generated $364.9 million in cash from operating activities; $207.3 million in adjusted free cash flow

Spent $157.6 million in capital expenditures including brownfield capacity expansion

Increasing our cash generation outlook; now expect to generate approximately $350 million of adjusted free cash flow in fiscal year 2026; including estimated $260 million of capital expenditures

Repurchased $133.9 million of stock to date in FY26; total of $235.8 million of stock repurchases completed against $400.0 million authorization announced in Q1-25

Funded consistent quarterly cash dividend

Brownfield capacity expansion project is on schedule and on budget; as planned, spending on project accelerating in second half of fiscal year 2026

Liquidity remains healthy at $793.8 million including $294.8 million of cash and $499.0 million of available borrowings under Credit Facility

Net Debt/EBITDA (0.5x) remains at historic lows with no near-term debt maturities

3rd QUARTER FISCAL YEAR 2026

SEGMENT OVERVIEW

Brian Malloy | President and Chief Operating Officer

SAO Segment Summary

$ millions

Q3-26

Q2-26

Q3-25

SEQUENTIAL

CHANGE

YEAR-OVER-

YEAR CHANGE

Pounds ('000)

51,832

46,836

44,584

4,996

7,248

Net Sales

735.1

661.6

642.9

73.5

92.2

Net Sales ex. Surcharge Revenue*

585.0

527.3

519.4

57.7

65.6

Operating Income

208.0

174.6

151.4

33.4

56.6

Adjusted Operating Margin ex. Surcharge Revenue*

35.6%

33.1%

29.1%

2.5%

6.5%

Q3-26 Business Results Q4-26 Outlook

Net sales excluding surcharge increased 11% sequentially driven by Aerospace and Defense and Energy end-use markets

Record operating income, up 19% sequentially, the result of higher productivity, effective mix management and realized benefits of pricing actions

Record adjusted operating margin, the seventeenth consecutive quarter with margin expansion

Maintaining focus on increasing productivity while managing operating costs closely and optimizing product mix

Anticipating increased shipment volumes driven by strong demand, productivity efforts and more available effective capacity uptime

Q4-26 operating income expected to be in the range of $224 million to $228 million

*Detailed schedule included in Non-GAAP Schedules in Appendix. 11

PEP Segment Summary

$ millions

Q3-26

Q2-26

Q3-25

SEQUENTIAL

CHANGE

YEAR-OVER-

YEAR CHANGE

Pounds ('000)*

2,602

2,218

2,584

384

Net Sales

97.7

83.2

104.9

14.5

(7.2)

Net Sales ex. Surcharge Revenue**

90.6

77.2

96.8

13.4

(6.2)

Operating Income

6.7

6.9

10.9

(0.2)

(4.2)

Adjusted Operating Margin ex. Surcharge Revenue**

7.4%

8.9%

11.3%

(1.5%)

(3.9%)

Q3-26 Business Results Q4-26 Outlook

Net sales excluding surcharge down 6% year-over-year reflecting increased sales in Aerospace and Defense end-use market more than offset by reductions in Medical end-use market

Year-over-year operating income lower as a result of reduction in Medical end-use market sales in Dynamet partially offset by improving profitability in Additive

Continuing to drive actions to enhance productivity and throughput rates across manufacturing facilities while closely managing costs

Q4-26 operating income expected to be in line with Q3-26

*Pounds includes only Dynamet and Additive businesses.

**Detailed schedule included in Non-GAAP Schedules in Appendix. 12

3rd QUARTER FISCAL YEAR 2026

CLOSING COMMENTS

Tony Thene | Chairman of the Board and Chief Executive Officer

Operating in accelerating demand environment, especially in the Aerospace and Defense end-use market

Fundamental supply-demand imbalance will grow as material demand accelerates

Anticipate strengthening volume, productivity, product mix and continued favorable pricing actions for our differentiated products, given the continued supply gap

Strong balance sheet and cash flow generation enables balanced approach to capital allocation

Investing in brownfield capacity expansion that will accelerate earnings growth but will NOT materially impact supply-demand imbalance

Completed record fiscal quarter with Q3 profits up 20% sequentially

SAO continues to expand adjusted operating margins, now 35.6%*

Expecting FY26 operating income to be

Anticipate generating approximately

*Detailed schedule included in Non-GAAP Schedules in Appendix. 14

APPENDIX OF

NON-GAAP SCHEDULES

Non-GAAP Schedules

Adjusted Operating Margin ex. Surcharge Revenue

$ millions

Q3-26

Q2-26

Q3-25

Net Sales

811.5

728.0

727.0

Less: Surcharge Revenue

155.9

138.9

130.0

Net Sales ex. Surcharge Revenue

655.6

589.1

597.0

Operating Income 186.5 155.2 137.8

Operating Margin

23.0%

21.3%

19.0%

Adjusted Operating Margin ex. Surcharge Revenue

28.4%

26.3%

23.1%

Management believes that removing the impact of raw material surcharge from operating margin provides a more consistent basis for comparing results of operations from period to period, thereby permitting management to evaluate performance and investors to make decisions based on the ongoing operations of the Company. In addition, management believes that excluding the impact of special items from operating margin is helpful in analyzing the operating performance of the Company, as these items are not indicative of ongoing operating performance. Management uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, the Company's board of directors and others.

Non-GAAP Schedules

Adjusted Segment Operating Margin ex. Surcharge Revenue

$ millions

SAO

PEP

Q3-26

Q2-26

Q3-25

Q3-26

Q2-26

Q3-25

Net Sales

735.1

661.6

642.9

97.7

83.2

104.9

Less: Surcharge Revenue

150.1

134.3

123.5

7.1

6.0

8.1

Net Sales ex. Surcharge Revenue

585.0

527.3

519.4

90.6

77.2

96.8

Operating Income

208.0

174.6

151.4

6.7

6.9

10.9

Operating Margin

28.3%

26.4%

23.5%

6.9%

8.3%

10.4%

Adjusted Operating Margin ex. Surcharge Revenue

35.6%

33.1%

29.1%

7.4%

8.9%

11.3%

Non-GAAP Schedules

Adjusted Earnings per Diluted Share

$ millions, except per share amounts

Q3-26

Q2-26

Q3-25

Earnings per Diluted Share

$2.77

$2.09

$1.88

Net Income

139.6 105.3 95.4

Special Item, net of tax:

Debt extinguishment losses

12.0

Special Item, net of tax:

12.0

Net Income Excluding Special Item

139.6

117.3

95.4

Adjusted Earnings per Diluted Share Excluding Special Item

$2.77

$2.33

$1.88

Management believes that earnings per share adjusted to exclude the impact of special items is helpful in analyzing the operating performance of the Company, as these items are not indicative of ongoing operating performance. Management uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, the Company's board of directors and others.

Non-GAAP Schedules

Adjusted Free Cash Flow

$ millions

Q3-26

Q2-26

Q1-26

9 MOS FY26

9 MOS FY25

Net Cash Provided from Operating Activities

193.5

132.2

39.2

364.9

182.3

Purchases of Property, Plant, Equipment and Software

(68.7)

(46.3) (42.6) (157.6) (96.3)

Proceeds from Disposals of Property, Plant and Equipment

0.1

Adjusted Free Cash Flow

124.8

85.9

(3.4)

207.3

86.1

Management believes that the adjusted free cash flow measure provides useful information to investors regarding the Company's financial condition because it is a measure of cash generated, which management evaluates for alternative uses.

The clerical accuracy of certain amounts may be impacted due to rounding.

$ millions

Q3-26

Q2-26

Q1-26

9 MOS

FY26

9 MOS

FY25

Net Income + Noncash Items

191.3

169.8

173.8

534.6

393.8

Inventory

(17.3)

(43.4)

15.6

(45.1)

(93.3)

Working Capital / Other

25.1

11.4

(144.3)

(107.5)

(59.7)

Total Net Working Capital / Other

7.8

(32.0)

(128.7)

(152.6)

(153.0)

Pension Plan Contributions

(5.6)

(5.9)

(17.1)

(58.5)

Net Cash Provided from Operating

Activities

Purchases of Property, Plant, Equipment and Software

Proceeds from Disposals of Property, Plant and Equipment

193.5

132.2

39.2

364.9

182.3

(68.7)

(46.3) (42.6) (157.6) (96.3)

0.1

Adjusted Free Cash Flow

124.8

85.9

(3.4)

207.3

86.1

Cash Flow & Liquidity Summary

Repurchased 145,000 shares ($52.7 million) in Q3-26 against $400.0 million repurchase program

Funded consistent quarterly cash dividend of $0.20 per share ($10.1 million)

$ millions

Q3-26

Q2-26

Q1-26

9 MOS

FY26

9 MOS

FY25

Cash

294.8

231.9

208.0

294.8

151.5

Available Borrowing Under Credit Facility

499.0

498.9

348.9

499.0

348.9

Total Liquidity

793.8

730.8

556.9

793.8

500.4

The clerical accuracy of certain amounts may be impacted due to rounding. 20

Disclaimer

Carpenter Technology Corporation published this content on April 29, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 29, 2026 at 14:05 UTC.