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1. Company Snapshot

1.a. Company Description

Carpenter Technology Corporation engages in the manufacture, fabrication, and distribution of specialty metals in the United States, Europe, the Asia Pacific, Mexico, Canada, and internationally.It operates in two segments, Specialty Alloys Operations and Performance Engineered Products.The company offers specialty alloys, including titanium alloys, powder metals, stainless steels, alloy steels, and tool steels, as well as additives, and metal powders and parts.


It serves aerospace, defense, medical, transportation, energy, industrial, and consumer markets.The company was founded in 1889 and is headquartered in Philadelphia, Pennsylvania.

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1.b. Last Insights on CRS

Carpenter Technology Corporation's recent performance has been positively driven by strong Q1 earnings, beating estimates with $2.43 per share, and a record operating income. The company has also signed long-term agreements at premium prices, supporting continued earnings growth. Analysts predict a 26.77% to 33.2% upside in the stock, citing strong agreement among analysts in raising earnings estimates. Additionally, the company has closed a $700 million private offering of 5.625% senior notes due 2034, which will be used to redeem higher-interest debt. Several investors have also increased their stakes in the company.

1.c. Company Highlights

2. Carpenter Technology's Record Earnings Driven by Pricing and Productivity

Carpenter Technology reported a strong start to fiscal year 2026 with record earnings, driven by increased productivity, product mix optimization, and pricing actions. The company generated $153.3 million in adjusted operating income, a 31% increase year-over-year. Sales, excluding surcharge, were $533.9 million, up 5% year-over-year. The SAO segment achieved an adjusted operating margin of 32%, a 15th consecutive quarter of margin expansion, with operating income of $170.7 million, up 27% year-over-year. Earnings per diluted share was $2.43, beating estimates of $2.13.

Publication Date: Oct -26

📋 Highlights
  • Record Adjusted Operating Income:: Carpenter Technology reported $153.3 million in adjusted operating income, a 31% YoY increase and a record quarterly result.
  • Strong SAO Segment Performance:: The SAO segment achieved $170.7 million in operating income (up 27% YoY) with a 32% adjusted margin, marking 15 consecutive quarters of margin expansion.
  • Aerospace Demand Surge:: Aerospace bookings rose 23% sequentially, driven by 5 new long-term agreements with significant price increases and strong order growth from Boeing and Airbus.
  • Positive Free Cash Flow Outlook:: The company anticipates $240–280 million in adjusted free cash flow for fiscal 2026, despite -$3.4 million in Q1 due to $42.6 million in capex.
  • Capital Allocation Commitments:: Carpenter repurchased $49.1 million of shares in Q1 and maintains a $400 million buyback authorization, alongside a $2.00 dividend per share (implied based on context).

Operational Highlights

The company saw demand strengthening, particularly in the Aerospace supply chain, with bookings up 23% sequentially. Pricing remains a tailwind, with the company negotiating 5 large LTAs with Aerospace customers with significant price increases. The Aerospace and Defense end-use market orders are steadily increasing, with a strong sequential growth in bookings. The company is seeing large increases in activity in the space and Defense submarkets.

Cash Flow and Capital Allocation

The company generated $39.2 million of cash from operating activities and spent $42.6 million on capital expenditures, resulting in negative adjusted free cash flow of $3.4 million. Despite this, Carpenter Technology expects to generate $240-280 million of adjusted free cash flow in fiscal year 2026. The company continues to invest in growth and return capital to shareholders, with $49.1 million of shares repurchased in the quarter and a commitment to a $400 million stock buyback authorization.

Outlook and Guidance

The company remains confident in its earnings guidance, with line of sight to the high end of the range for fiscal year 2026 ($660 million to $700 million in operating income) and a target of $765 million to $800 million for fiscal year 2027. The recent FAA approval of a 737 MAX rate increase from 38 to 42 per month supports the company's positive outlook. Analysts estimate next year's revenue growth at 7.0%, indicating a continued growth trajectory.

Valuation

With a P/E Ratio of 38.05 and an EV/EBITDA of 22.7, the market is pricing in a certain level of growth and profitability. The company's ROIC of 15.02% and ROE of 22.68% indicate a strong ability to generate returns on capital. The dividend yield is relatively low at 0.25%, but the company's commitment to returning capital to shareholders through share repurchases is evident. The Free Cash Flow Yield is 1.72%, indicating a reasonable valuation. Overall, the company's strong earnings growth trajectory and favorable industry trends support its current valuation.

3. NewsRoom

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Capital Fund Management S.A. Sells 17,094 Shares of Carpenter Technology Corporation $CRS

Dec -03

Source: defenseworld.net

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Carpenter Technology: Why FY27 Won't Be The Peak

Dec -02

Source: seekingalpha.com

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See How Bullish Outlier Buys Boost Carpenter Technology

Nov -26

Source: fxempire.com

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Arvin Capital Management LP Trims Position in Carpenter Technology Corporation $CRS

Nov -26

Source: defenseworld.net

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AXQ Capital LP Purchases Shares of 851 Carpenter Technology Corporation $CRS

Nov -26

Source: defenseworld.net

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Ameritas Investment Partners Inc. Reduces Position in Carpenter Technology Corporation $CRS

Nov -26

Source: defenseworld.net

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AI Fatigue? These 3 Analyst-Upgraded Stocks Offer Real Growth Potential

Nov -24

Source: marketbeat.com

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Carpenter Technology Corporation Announces Closing of $700.0 Million Private Offering of 5.625% Senior Notes Due 2034 and Amendment of Credit Agreement

Nov -20

Source: globenewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.61%)

6. Segments

Specialty Alloys Operations

Expected Growth: 8.5%

Carpenter Technology Corporation's Specialty Alloys Operations growth of 8.5% is driven by increasing demand for high-performance alloys in aerospace and energy markets, coupled with the company's strategic investments in premium alloy production and expansion into emerging markets, resulting in higher sales volumes and improved pricing power.

Performance Engineered Products

Expected Growth: 9.5%

Carpenter Technology Corporation's 9.5% growth in Performance Engineered Products is driven by increasing demand for high-performance alloys in aerospace and energy markets, coupled with the company's strategic investments in additive manufacturing and expansion into emerging markets, resulting in improved product offerings and enhanced customer relationships.

Intersegment

Expected Growth: 7.0%

Carpenter Technology Corporation's 7.0% intersegment growth is driven by increasing demand for premium alloys in the aerospace and energy industries, coupled with strategic investments in advanced manufacturing technologies and expansion into high-growth markets.

7. Detailed Products

Specialty Alloys

Carpenter Technology Corporation offers a range of specialty alloys used in aerospace, energy, and industrial applications. These alloys provide high strength, corrosion resistance, and durability.

Stainless Steels

The company provides a variety of stainless steel products, including sheet, plate, and bar products, used in food processing, chemical processing, and construction industries.

Titanium Alloys

Carpenter Technology Corporation offers titanium alloys used in aerospace, industrial, and medical applications, providing high strength-to-weight ratio and corrosion resistance.

Powder Metals

The company provides powder metal products, including metal powders and parts, used in aerospace, automotive, and industrial applications.

Additive Manufacturing

Carpenter Technology Corporation offers additive manufacturing services, providing complex parts and components for aerospace, industrial, and medical applications.

Soft Magnetics

The company provides soft magnetic alloys and components used in electrical engineering, automotive, and industrial applications.

8. Carpenter Technology Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Carpenter Technology Corporation's products are specialized and have few substitutes, but the company still faces some competition from alternative materials.

Bargaining Power Of Customers

Carpenter Technology Corporation's customers are diverse and have limited bargaining power, as they are dependent on the company's specialized products.

Bargaining Power Of Suppliers

Carpenter Technology Corporation's suppliers have some bargaining power due to the specialized nature of the company's products, but the company's large scale of operations helps to mitigate this power.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the specialty metals industry, including the need for significant capital investment and technical expertise.

Intensity Of Rivalry

The specialty metals industry is highly competitive, with several established players competing for market share, leading to a high intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 33.46%
Debt Cost 10.04%
Equity Weight 66.54%
Equity Cost 11.30%
WACC 10.87%
Leverage 50.29%

11. Quality Control: Carpenter Technology Corporation passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Mueller Industries

A-Score: 6.3/10

Value: 4.5

Growth: 7.1

Quality: 7.9

Yield: 2.0

Momentum: 8.5

Volatility: 8.0

1-Year Total Return ->

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AZZ

A-Score: 6.3/10

Value: 6.7

Growth: 6.7

Quality: 6.9

Yield: 2.0

Momentum: 8.0

Volatility: 7.3

1-Year Total Return ->

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Worthington Industries

A-Score: 5.0/10

Value: 3.6

Growth: 3.1

Quality: 5.7

Yield: 3.0

Momentum: 8.5

Volatility: 6.0

1-Year Total Return ->

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Carpenter Technology

A-Score: 4.9/10

Value: 1.1

Growth: 7.2

Quality: 6.9

Yield: 1.0

Momentum: 9.0

Volatility: 4.0

1-Year Total Return ->

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Stock-Card
ATI

A-Score: 4.6/10

Value: 2.4

Growth: 6.8

Quality: 5.6

Yield: 0.0

Momentum: 8.0

Volatility: 4.7

1-Year Total Return ->

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ESAB

A-Score: 4.1/10

Value: 3.0

Growth: 4.7

Quality: 5.9

Yield: 0.0

Momentum: 5.0

Volatility: 6.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

307.12$

Current Price

307.12$

Potential

-0.00%

Expected Cash-Flows