Key Takeaways
Carpenter Technology Corp. (NYSE: CRS) raised its full-year operating income forecast by 33 percent after reporting record third-quarter earnings, driven by surging demand for its specialty alloys from the aerospace and defense industries.
“Commercial aircraft production is gradually ramping after several years of operational mishaps and supply chain challenges at airframers,” Brian Keegan, senior research analyst at Sands Capital, said in a note. “This should feed positively into Carpenter’s Specialty Alloys Operation volume and pricing over the upcoming years.”
The Philadelphia-based manufacturer reported adjusted earnings per share of $2.77, a 47 percent increase from the same period last year, on a 12 percent jump in sales to $812 million. The company raised its operating income guidance for fiscal 2026 to a midpoint of $702.5 million and hiked its adjusted free cash flow forecast by 22.3 percent to $350 million.
The bullish forecast reflects a tight market where only three U.S. companies possess the capability to produce such mission-critical alloys. This supply/demand imbalance gives Carpenter significant pricing power, with prices for its aerospace customers increasing almost 10 percent year-over-year, CEO Tony Thene said on the company’s latest quarterly call.
The aerospace and defense segment makes up about two-thirds of Carpenter’s revenue and grew 17 percent year-over-year in the third quarter. Customers include Boeing Co., Airbus SE, and RTX Corp.’s Pratt & Whitney. Demand is so strong that “over the last three months, we’ve had customers reach out requesting urgent deliveries,” Thene said. Boeing’s anticipated production increase for its 737 jets this summer is expected to result in more orders for Carpenter.
The company is also seeing growing demand from industrial gas turbines used in data centers, a segment that now comprises about 5 percent of revenue.
Despite the strong outlook, the company faces potential headwinds. “Any delays in deliveries related to the ramp in production for Airbus and Boeing could lead to volatility in earnings,” said Cody Smith, portfolio manager for Ceredex Value Advisors.
Carpenter has $164.2 million remaining in its share-repurchase authorization and pays an annual dividend of 80 cents per share.
The guidance raise suggests management expects strong demand from aerospace and AI-driven data centers to continue. Investors will watch for updates on Boeing's 737 production ramp this summer as a key indicator for future orders.
This article is for informational purposes only and does not constitute investment advice.
