01—Abstract
Summary
Summary of the 10-Q filed October 23, 2025. Cited figures are marked; the original filing is the authoritative source.
Carpenter Technology Corporation (CRS) reported a strong fiscal first quarter ended September 29, 2025, with net income of $122.5 milliona, a significant increase from $84.8 million in the prior year's comparable period.
This growth was driven by a 2% increase in net sales to $733.7 millionb, with a notable 4% increase when excluding surcharge revenue, highlighting improved pricing and product mix. The company's Specialty Alloys Operations (SAO) segment continues its impressive performance, demonstrating the fifteenth consecutive quarter of increasing adjusted operating margins. Key drivers for the quarter included robust demand in the Aerospace and Defense sector, fueled by increased production rates and successful long-term agreements with significant price increases.
While the Medical segment experienced a decline, the Energy segment showed modest growth. The company also continued its capital allocation strategy, returning cash to shareholders through dividends and share repurchases, while investing in growth initiatives such as a brownfield capacity expansion. Despite some headwinds like the decrease in the Performance Engineered Products (PEP) segment and increased capital expenditures impacting free cash flow, Carpenter Technology remains optimistic about its long-term outlook, particularly in the Aerospace & Defense and Energy markets.
02—Key points
Key Highlights
- Net income increased significantly by 44.5% year-over-year to $122.5 million for the quarter ended September 29, 2025.
- Net sales grew 2.0% to $733.7 million, with sales excluding surcharge revenue up 4.0%, indicating strong underlying price and volume improvements.
- The Specialty Alloys Operations (SAO) segment showed strong performance with a 2.0% increase in net sales and a significant improvement in adjusted operating margin to 32.0% (vs. 26.3% YoY), marking 15 consecutive quarters of growth.
- Aerospace and Defense revenue increased 8% (11% excluding surcharges), driven by higher production rates and new long-term agreements with improved pricing.
- The company repurchased $49.1 million of its common stock during the quarter as part of its $400 million share repurchase program.
- Capital expenditures increased to $42.6 million from $26.9 million in the prior year, primarily for growth initiatives like the brownfield capacity expansion.
- Adjusted free cash flow turned negative ($3.4 million) compared to positive $13.3 million in the prior year, largely due to increased capital expenditures.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2026, Carpenter Technology Corp kept $0.17.
- Revenue$733.7M100.0%
- Cost of revenue−$517.3M70.5%
- Gross profit$216.4M29.5%
- Operating costs−$63.1M8.6%
- Operating income$153.3M20.9%
- Interest, other & tax−$30.8M4.2%
- Net income$122.5M16.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed October 23, 2025Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $733.70M$717.60M | +2.2% |
| Gross Profit | $216.40M$176.30M | +22.7% |
| SG&A Expenses | $63.10M$59.10M | +6.8% |
| Operating Income | $153.30M$113.60M | +34.9% |
| Net Income | $122.50M$84.80M | +44.5% |
| EPS (Basic) | $2.45$1.69 | +45.0% |
| EPS (Diluted) | $2.43$1.67 | +45.5% |
| Shares Outstanding (Basic) | 50.10M50.10M | 0.0% |
| Shares Outstanding (Diluted) | 50.40M50.70M | −0.6% |
05—Questions
Frequently Asked Questions
How did Carpenter Technology's revenue performance differ between its two segments?
The Specialty Alloys Operations (SAO) segment reported a 2% increase in net sales to $659.6 million, and a 5% increase excluding surcharge revenue, driven by price increases and product mix improvements. In contrast, the Performance Engineered Products (PEP) segment saw a 7% decrease in net sales to $93.6 million (down 6% excluding surcharges), primarily due to lower sales in the Medical and Distribution end-use markets.
What is the company's outlook regarding key end-use markets?
Carpenter Technology is optimistic about its long-term outlook, especially in the Aerospace and Defense and Energy markets, which have strong multi-year outlooks. The company noted increasing demand in Aerospace and Defense due to ramping production rates and secured long-term agreements with significant price increases. The Energy market saw growth driven by demand for data center power generation, though offset by decreased activity in the oil and gas sub-market.
How is the company managing its cash and liquidity?
The company generated $39.2 million in cash from operating activities. However, adjusted free cash flow was negative $3.4 million due to higher capital expenditures related to growth initiatives like the brownfield expansion. Carpenter Technology maintains a strong liquidity position with $208.0 million in cash and cash equivalents and $348.9 million available under its credit facility, totaling $556.9 million. The company is also returning capital to shareholders through dividends and a $400 million share repurchase program.
Are there any significant new accounting pronouncements that will impact the company?
The company has adopted ASU 2023-07 for Segment Reporting, which enhances segment disclosures. It is also monitoring ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures), which are primarily disclosure requirements and are not expected to materially impact the consolidated financial statements. No other significant new accounting pronouncements adopted in this period are expected to materially affect the financial statements.
06—Continue