Carpenter Technology raises FY26 guidance after record Q3 beat

Carpenter Technology Corp. reported fiscal third-quarter operating income of $186.5 million, a record that beat analyst estimates and prompted management to raise its full-year outlook on accelerating aerospace and defense demand.

"The third quarter of fiscal year 2026 represents yet another record setting quarter," Chairman and Chief Executive Officer Tony Thene said. "Increasing operating income 20% sequentially, over what was a record quarter in a market that is accelerating, speaks to our focus on industry leading execution."

The specialty metals manufacturer posted earnings per share of $2.77 for the quarter ended March 31, topping the $2.66 consensus estimate. Revenue of $811.5 million also exceeded the $806.2 million analyst forecast, with sales excluding raw material surcharge rising 10% year-over-year to $655.6 million.

Metric	Actual	Consensus	Beat/Miss
Revenue	$811.5M	$806.2M	+0.7%
EPS	$2.77	$2.66	+$0.11
SAO Operating Margin	35.6%	—	Record

The Specialty Alloys Operations segment, Carpenter's core business, delivered record operating income of $208 million, up 19% from the prior quarter and 37% from a year earlier. Adjusted operating margins in SAO expanded to 35.6%, the 17th consecutive quarter of improvement and up from 33.1% in the fiscal second quarter and 29.1% a year ago. The company generated $193.5 million in cash from operations and $124.8 million in adjusted free cash flow during the quarter.

Aerospace and Defense sales rose 17% year-over-year and 13% sequentially, driven by accelerating build rates at Boeing and Airbus. Energy sales jumped 44% year-over-year, led by demand for industrial gas turbines tied to data center power needs. Medical sales declined 29% year-over-year, though management noted bookings increased significantly in the quarter, signaling a near-term recovery.

Management raised its fiscal 2026 operating income guidance to a range of $700 million to $705 million, representing at least a 33% increase over fiscal 2025. Adjusted free cash flow guidance was lifted to approximately $350 million. For the fiscal fourth quarter, the company expects SAO segment operating income of $224 million to $228 million.

The company repurchased $52.7 million in shares during the quarter under its $400 million buyback authorization, with $164.2 million remaining. Total liquidity stood at $793.8 million, including $294.8 million in cash.

The guidance raise signals management expects aerospace demand to accelerate further as OEMs push toward higher production rates. The company plans to provide an updated fiscal 2027 outlook on its next earnings call.

This article is for informational purposes only and does not constitute investment advice.