Carpenter Technology surges on record Q2, lifts guidance
Aerospace demand drives 31% jump in operating income as specialty alloys maker raises FY2026 outlook
Carpenter Technology Corporation reported record second-quarter operating income and raised its full-year guidance, as accelerating demand from aerospace and defense customers powers growth in the specialty metals manufacturer's premium business segments.
The Philadelphia-based company posted operating income of $155.2 million for the fiscal second quarter, a 31% increase from the same period last year, while net sales climbed 8% to $728 million. Adjusted earnings per share of $2.33 exceeded analyst expectations by 13 cents, according to earnings coverage from Investing.com.
The standout performance came from Carpenter's Specialty Alloys Operations (SAO) segment, which generated record operating income of $174.6 million with an adjusted operating margin of 33.1%. This marked the 16th consecutive quarter of margin expansion for the business unit, demonstrating the company's success in moving toward higher-value products.
Buoyed by the strong quarter, Carpenter raised its fiscal year 2026 operating income guidance to a range of $680 million to $700 million, representing a 30% to 33% increase over fiscal year 2025. The company also increased its adjusted free cash flow outlook to at least $280 million for the year. For the third quarter, management anticipates operating income between $177 million and $182 million.
Commercial aerospace bookings surged 23% sequentially, highlighting the strength of recovery in a market that accounts for more than 60% of Carpenter's revenue. The aerospace and defense end-use market has been accelerating, with the company noting that September experienced the highest order intake in over a year. Carpenter has also successfully negotiated several long-term agreements with aerospace customers that include significant price increases, reflecting its pricing power in specialty materials.
The upbeat results come amid broader growth in the aerospace special metals market, which is projected to reach $13.36 billion by 2035, growing at a 4.3% compound annual rate from 2026, according to market research data. Boeing's projection of 44,000 new aircraft demand by 2044 and defense spending expected to exceed $1.19 trillion over the next decade for new and upgraded military aircraft provide a long-term runway for Carpenter's high-performance alloys.
Analysts remain overwhelmingly positive on the stock. Prior to Thursday's earnings release, Carpenter maintained a consensus "Strong Buy" rating from six analysts with a median price target of $362.17, according to market data. The company's forward price-to-earnings ratio of 16.56 suggests investors are expecting continued earnings growth to support its current valuation.
Carpenter has been investing to meet the rising demand, with its brownfield capacity expansion project proceeding on schedule and within budget. The company opened a new hot strip mill facility in Alabama in 2023 specifically for aerospace-grade specialty alloys, with production capacity exceeding 200,000 tons per year. Capital spending is expected to increase in the second half of fiscal year 2026 to support further expansion.
The specialty alloys manufacturer's performance reflects its strategic positioning as a critical supplier of materials essential for demanding aerospace applications, including jet engine components and airframe parts. As aircraft manufacturers push for lighter, more efficient designs, the adoption of advanced materials like nickel-based and titanium-alloyed dispersion strengthened alloys continues to grow, a trend that benefits Carpenter's specialized product portfolio.
Looking ahead, management has indicated opportunities to reach the higher end of its guidance range due to increased volume, strategic pricing, and enhanced productivity. For fiscal year 2027, the company is forecasting operating profits of $765 million to $800 million, suggesting confidence in the sustainability of the aerospace recovery.