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CARPENTER TECHNOLOGY CORP

CRS
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Business Summary

Carpenter Technology Corporation, founded in 1889, is engaged in the manufacturing, fabrication and distribution of specialty metals, operating as a producer and distributor of premium specialty alloys including titanium alloys, powder metals, stainless steels, alloy steels, and tool steels. The company is a recognized leader in high-performance specialty alloy-based materials and process solutions for critical applications in the aerospace, defense, medical, transportation, energy, industrial and consumer markets, and has evolved to become a pioneer in premium specialty alloys including titanium, nickel, and cobalt, as well as alloys specifically engineered for additive manufacturing processes and soft magnetics applications. The company's sales can be influenced by seasonal factors with the first six months of the fiscal year typically being lower, principally because of annual plant vacation and maintenance shutdowns by the company as well as by many of its customers.

The company describes itself as a leader in specialty materials for critical applications with over 135 years of metallurgical and manufacturing expertise, and its business is highly competitive. For its high-value products used in demanding applications, there are less than ten companies producing one or more similar products that the company considers its major competitors, and the company's experience, technical capabilities, product offerings and research and development efforts represent barriers to existing and potential competitors. For other products, there are several dozen smaller producing companies and converting companies that are also competitors, as well as several hundred independent distributors of products similar to those distributed by the company, and numerous foreign companies produce various specialty metal products similar to those produced by the company.

The company generates revenue through the manufacturing, fabrication and distribution of specialty metals, with sales distributed directly from its production plants and distribution network as well as through independent distributors, and unlike many other specialty steel producers, the company operates its own worldwide network of service and distribution centers located in the United States, Canada, Mexico, Europe and Asia that allow it to work more closely with customers and to offer various just-in-time stocking programs. The company primarily processes basic raw materials such as nickel, cobalt, titanium, manganese, chromium, molybdenum, iron scrap and other metal alloying elements through various melting, hot forming and cold working facilities to produce finished products in the form of billet, bar, rod, wire and narrow strip in many sizes and finishes, and also produces certain metal powders and parts.

The company is organized in two reportable business segments: Specialty Alloys Operations (SAO) and Performance Engineered Products (PEP). The SAO segment is comprised of the company's major premium alloy and stainless steel manufacturing operations, including operations performed at mills primarily in Reading and Latrobe, Pennsylvania and surrounding areas as well as South Carolina and Alabama, and the combined assets of the SAO segment are managed in an integrated manner to optimize efficiency and profitability across the total system. The PEP segment is comprised of the company's differentiated operations, including the Dynamet titanium business, the Carpenter Additive business and the Latrobe and Mexico distribution businesses, and the businesses in the PEP segment are managed with an entrepreneurial structure to promote flexibility and agility to quickly respond to market dynamics.

For fiscal year 2025, net sales were $2,877.1 million , compared to $2,759.7 million in fiscal year 2024 and $2,550.3 million in fiscal year 2023. Operating income was $521.8 million in fiscal year 2025, compared to $323.1 million in fiscal year 2024 and $133.1 million in fiscal year 2023. Net income was $376.0 million in fiscal year 2025, compared to $186.5 million in fiscal year 2024 and $56.4 million in fiscal year 2023. Diluted earnings per share were $7.42 in fiscal year 2025, compared to $3.70 in fiscal year 2024 and $1.14 in fiscal year 2023. The company generated $440.4 million of cash from operating activities in fiscal year 2025, compared to $274.9 million in fiscal year 2024 and $14.7 million in fiscal year 2023. Adjusted free cash flow was $287.5 million in fiscal year 2025, compared to $179.0 million in fiscal year 2024 and $(67.6) million in fiscal year 2023. Purchases of property, plant, equipment and software were $154.3 million in fiscal year 2025, compared to $96.6 million in fiscal year 2024 and $82.3 million in fiscal year 2023. Pounds sold were 192,980 in fiscal year 2025, compared to 206,302 in fiscal year 2024 and 214,122 in fiscal year 2023.

During fiscal year 2025, the company repurchased 575,000 shares of its common stock in the open market for an aggregate $101.9 million and paid dividends of $40.3 million . In July 2024, the company's Board of Directors authorized a share repurchase program of up to $400.0 million of the company's outstanding common stock, and as of June 30, 2025, $298.1 million of the $400.0 million remained available for future purchases. During fiscal year 2025, the company made $64.8 million of pension contributions to its qualified defined benefit pension plans. The company also announced a brownfield expansion project in Athens, Alabama.

Business Outlook

In fiscal year 2026, the company expects capital expenditures, including the brownfield expansion, to be in the range of $280.0 million to $300.0 million .

The company states that the markets it serves, specifically Aerospace and Defense, Medical and Energy, have a strong, multi-year outlook, and that customers rely on the company's diverse portfolio of advanced material solutions and world class capabilities. The company is investing to accelerate its growth with a recently announced brownfield primary and secondary melt capacity expansion in Athens, Alabama, and management believes the company's earnings growth journey will extend far beyond fiscal year 2025.

The company's fiscal year 2025 results reflect ongoing improvement in product mix with a shift in capacity to more complex, higher value materials as well as pricing actions and expanding operational efficiencies. The company expects to see positive contribution from a more favorable product mix in its margin performance over time, though the impact by period may fluctuate. The company's surcharge mechanism is structured to recover increases in raw material costs, although in certain cases with a lag effect, and the company expects to use these surcharge mechanisms to pass through the impact of any incremental tariffs on its raw material costs to its customers.

The company has a strong balance sheet and adjusted free cash flow, and will continue to take a balanced approach to capital allocation: sustaining its current asset base to achieve its targets, returning cash to stockholders through its stock buyback and dividend programs and investing in incremental growth initiatives, including the recently announced brownfield expansion project in Athens, Alabama. The company targets minimum liquidity of $150.0 million , consisting of cash and cash equivalents added to available borrowing capacity under its Credit Facility. As of June 30, 2025, the company had total liquidity of $664.4 million , which includes cash and cash equivalents of $315.5 million and available borrowing capacity of $348.9 million under the Credit Facility.

The company's expenditures for company-sponsored research and development were $26.1 million in fiscal year 2025, $25.6 million in fiscal year 2024 and $24.4 million in fiscal year 2023. Capital expenditures for property, plant, equipment and software were $154.3 million for fiscal year 2025 as compared to $96.6 million for fiscal year 2024. Dividends for fiscal year 2025 were $40.3 million , as compared to $40.0 million in the prior year period. In fiscal years 2025, 2024 and 2023, the company declared and paid quarterly cash dividends of $0.20 per share . The company will discretionarily use excess cash for a share repurchase program up to $400.0 million of its outstanding common stock, with the primary use of this program being to offset dilution.

The company continues to closely monitor the evolving tariff news as well as engage with its customers and suppliers to analyze how tariffs could impact its business. The company, as well as others in its industry, has established long-standing surcharge mechanisms to pass through changes in raw material prices to customers, and based on current information, the company believes there will not be a material impact to the company from tariffs. The company also notes that the commercial aerospace and defense markets are historically cyclical due to both external and internal market factors, and a downturn in the commercial aerospace or defense industry would adversely affect the demand for its products and/or the prices at which it is able to sell its products.

Risk Factors

A significant portion of the company's sales represents products sold to customers in the commercial aerospace, defense and energy markets, which are historically cyclical and a downturn in these industries would adversely affect demand for the company's products. The company relies on third parties to supply critical raw materials such as nickel, cobalt, chromium, manganese, molybdenum, titanium, iron and scrap, and costs of these materials have been volatile due to factors beyond the company's control, with purchase prices historically volatile including the impact of tariffs. The company has obligations to provide substantial benefits to active and retired employees, with most costs paid by the company and not covered by insurance, and a decline in the value of plan investments or an increase in costs could materially change the timing and amount of required pension funding. The company values most of its inventory using the LIFO method, and as of June 30, 2025, if the FIFO method had been used instead, inventories would have been approximately $344.5 million higher, and repeal of the LIFO method could result in a substantial tax liability. The company's manufacturing processes are complex and depend upon critical, high cost equipment located primarily in Reading and Latrobe, Pennsylvania and Athens, Alabama, and prolonged periods of reduced production due to unplanned equipment failures or catastrophic events could materially adversely affect the company.

Management Priorities

Management characterized fiscal year 2025 as the most profitable year in Carpenter Technology's history with operating income of $521.8 million or adjusted operating income of $525.4 million , representing an increase in adjusted operating income of $171.3 million , or 48 percent , from the prior fiscal year when excluding special items. Management noted that the SAO segment exceeded expectations by generating $588.6 million of operating income with an operating margin of 23.0 percent of net sales (28.6 percent of net sales excluding surcharge revenue). Management emphasized that the company continues to drive earnings momentum through improved productivity, product mix optimization and pricing actions, and that despite disruptions in the supply chains where the company participates, it has continued to deliver record results. Management stated that looking over the long term, the same dynamics that are driving current performance are expected to get stronger, and that the company is well positioned to achieve its goals and believes its earnings growth journey will extend far beyond fiscal year 2025.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 7, MD&A — Business Trends
  2. [2] Item 7, MD&A — Business Trends
  3. [3] Item 7, MD&A — Business Trends
  4. [4] Item 7, MD&A — Operating Performance Overview
  5. [5] Item 7, MD&A — Operating Performance Overview
  6. [6] Item 7, MD&A — Operating Performance Overview
  7. [7] Item 7, MD&A — Results of Operations
  8. [8] Item 7, MD&A — Results of Operations
  9. [9] Item 7, MD&A — Results of Operations
  10. [10] Item 7, MD&A — Results of Operations
  11. [11] Item 7, MD&A — Results of Operations
  12. [12] Item 7, MD&A — Results of Operations
  13. [13] Item 7, MD&A — Liquidity and Financial Resources
  14. [14] Item 7, MD&A — Liquidity and Financial Resources
  15. [15] Item 7, MD&A — Non-GAAP Financial Measures
  16. [16] Item 7, MD&A — Non-GAAP Financial Measures
  17. [17] Item 7, MD&A — Non-GAAP Financial Measures
  18. [18] Item 7, MD&A — Non-GAAP Financial Measures
  19. [19] Item 7, MD&A — Business Trends
  20. [20] Item 7, MD&A — Business Trends
  21. [21] Item 7, MD&A — Business Trends
  22. [22] Item 7, MD&A — Business Trends
  23. [23] Item 7, MD&A — Business Trends
  24. [24] Item 7, MD&A — Business Trends
  25. [25] Item 7, MD&A — Operating Performance Overview
  26. [26] Item 7, MD&A — Operating Performance Overview
  27. [27] Item 7, MD&A — Operating Performance Overview
  28. [28] Item 5, Market for Registrant's Common Equity
  29. [29] Item 5, Market for Registrant's Common Equity
  30. [30] Item 5, Market for Registrant's Common Equity
  31. [31] Item 7, MD&A — Liquidity and Financial Resources
  32. [32] Item 7, MD&A — Liquidity and Financial Resources
  33. [33] Item 7, MD&A — Liquidity and Financial Resources
  34. [34] Item 7, MD&A — Liquidity and Financial Resources
  35. [35] Item 7, MD&A — Liquidity and Financial Resources
  36. [36] Item 7, MD&A — Liquidity and Financial Resources
  37. [37] Item 1, Business — Research, Product and Process Development
  38. [38] Item 1, Business — Research, Product and Process Development
  39. [39] Item 1, Business — Research, Product and Process Development
  40. [40] Item 7, MD&A — Business Trends
  41. [41] Item 7, MD&A — Business Trends
  42. [42] Item 7, MD&A — Liquidity and Financial Resources
  43. [43] Item 7, MD&A — Liquidity and Financial Resources
  44. [44] Item 5, Market for Registrant's Common Equity
  45. [45] Item 5, Market for Registrant's Common Equity
  46. [46] Item 1A, Risk Factors
  47. [47] Item 7, MD&A — Operating Performance Overview
  48. [48] Item 7, MD&A — Operating Performance Overview
  49. [49] Item 7, MD&A — Operating Performance Overview
  50. [50] Item 7, MD&A — Operating Performance Overview
  51. [51] Item 7, MD&A — Operating Performance Overview
  52. [52] Item 7, MD&A — Operating Performance Overview
  53. [53] Item 7, MD&A — Operating Performance Overview
  54. [54] Item 8, Consolidated Statements of Operations
  55. [55] Item 8, Consolidated Statements of Operations
  56. [56] Item 8, Consolidated Statements of Operations
  57. [57] Item 8, Consolidated Statements of Operations
  58. [58] Item 8, Consolidated Statements of Operations
  59. [59] Item 8, Consolidated Statements of Operations
  60. [60] Item 8, Consolidated Statements of Operations
  61. [61] Item 8, Consolidated Statements of Operations
  62. [62] Item 8, Consolidated Statements of Operations
  63. [63] Item 7, MD&A — Gross Profit
  64. [64] Item 8, Consolidated Statements of Operations
  65. [65] Item 7, MD&A — Gross Profit
  66. [66] Item 7, MD&A — Operating Income
  67. [67] Item 7, MD&A — Operating Income
  68. [68] Item 7, MD&A — Operating Income
  69. [69] Item 7, MD&A — Operating Income
  70. [70] Item 8, Consolidated Balance Sheets
  71. [71] Item 8, Consolidated Balance Sheets
  72. [72] Item 8, Consolidated Balance Sheets
  73. [73] Item 8, Consolidated Balance Sheets
  74. [74] Item 7, MD&A — Restructuring and Asset Impairment Charges
  75. [75] Item 7, MD&A — Goodwill Impairment Charge
  76. [76] Item 7, MD&A — Restructuring and Asset Impairment Charges
  77. [77] Item 7, MD&A — Net Pension Expense
  78. [78] Item 7, MD&A — Business Segment Results
  79. [79] Item 7, MD&A — Business Segment Results
  80. [80] Item 7, MD&A — Business Segment Results
  81. [81] Item 7, MD&A — Business Segment Results
  82. [82] Item 7, MD&A — Business Segment Results
  83. [83] Item 7, MD&A — Business Segment Results

Analysis on 6/8/2026