PHILADELPHIA, Pa. – Carpenter Technology continues to sail with the wind at its back. The company, which was founded in Reading in 1889 and maintains large manufacturing facilities in Berks County, smashed several financial records in the first quarter of fiscal year 2025.
In addition, Carpenter raised its guidance for the remainder of the fiscal year and beyond.
Among other achievements, Carpenter reported adjusted quarterly earnings per diluted share of $1.73 per share, beating the Zacks Consensus Estimate of $1.57 per share. This compares to earnings of $0.88 per share a year ago and represents an earnings surprise of 10.19%.
Further, In July 2024, Carpenter’s Board of Directors authorized a share repurchase program up to $400 million of its outstanding common stock.
You would think that Wall Street would be jumping for joy. Not so. In mid-afternoon trading, Carpenter’s stock was down $2.28, a decline of 1.46%. No wonder pleasing the stock market is such a challenge for CEO’s.
Management Thoughts
Speaking with analysts during a webcast, Tony R. Thene, President and CEO of Carpenter Technology, pointed with pride to the performance of the company’s Specialty Alloys Operations (SAO) segment which produced adjusted operating income of $135 million which beat fiscal 2024’s first quarter by 66% and also topped fiscal 2025 first quarter guidance of $127 million to $133 million.
Thene also pointed out impressive performance in its end-user markets where, despite continuing supply chain problems, the aerospace and defense market delivered sales excluding surcharge of $349.9 million, up 34% from the prior fiscal year’s first quarter.
The medical market grew by 10% and energy grew by an impressive 35%, Thene noted. However, the smaller transportation market declined 28% and the industrial and consumer market declined 9%.
In a statement, Thene commented, “In the first quarter of fiscal year 2025, we delivered the most profitable first quarter in Carpenter Technology’s history. We continue to drive earnings momentum through improved productivity, product mix optimization and pricing actions.”
Fiscal 2025 First Quarter Operating Results
Carpenter reported net sales for the first quarter of fiscal year 2025 were $717.6 million, compared with $651.9 million in the first quarter of fiscal year 2024, an increase of $65.7 million (or 10 %), on a 3% increase in shipment volume.
Operating income, according to the company, was $113.6 million compared to operating income of $69.0 million in the prior year period. Adjusted operating income was $117.2 million in the first quarter of fiscal year 2025.
In the first quarter, Carpenter claimed earnings per diluted share was $1.67 compared to $0.88 per diluted share in the prior year first quarter. Adjusted earnings per diluted share in the quarter was $1.73. The company said these results primarily reflect an ongoing improvement in product mix with a shift in capacity to more complex, higher value materials as well as higher pricing and increased operating efficiencies compared to the prior year period.
The company reported cash provided from operating activities in the first quarter was $40.2 million compared to $7.4 million in the same quarter last year. Adjusted free cash flow in the quarter was $13.3 million, compared to negative $14.6 million in the same quarter last year.
Segment Results
Carpenter has two reportable segments, Specialty Alloys Operations (SAO) and Performance Engineered Products (PEP).
The SAO segment is comprised of Carpenter’s major premium alloy and stainless steel manufacturing operations. This includes operations performed at mills primarily in Reading and Latrobe, Pennsylvania and surrounding areas as well as South Carolina and Alabama.
Carpenter reported the SAO segment sold 50.1 million pounds in the first quarter of fiscal 2025 compared to 49.992 million pounds the prior year. Net sales were $645.1 million this quarter, up from $570.1 million in the first quarter of fiscal 2024. Operating income was $134.5 million, an increase of $53.7 million above fiscal 2024.
The PEP segment is comprised of the company’s differentiated operations, Carpenter noted. This segment includes the Dynamet titanium business, the Carpenter Additive business and the Latrobe and Mexico distribution businesses. The businesses in the PEP segment are managed with an entrepreneurial structure to promote flexibility and agility to quickly respond to market dynamics. The company believes this model will ultimately drive overall revenue and profit growth. The pounds sold data for the PEP segment includes only the Dynamet and Additive businesses.
Carpenter reported the PEP segment sold 2.634 million pounds in the first quarter of fiscal 2025 compared to 2.302 million pounds the prior year. Net sales were $100.8 million this quarter, down from $101.8 million in the first quarter of fiscal 2024. Operating income was $7.3 million, a decrease of $1.8 million below fiscal 2024.
Fiscal Year 2025 Outlook
Thene declared, “Given the solid execution of the business, strong market position and unique manufacturing capabilities, we have the confidence to guide to the high end of the previously disclosed operating income range of $460 million to $500 million for the full fiscal year. We also expect to generate $250 million to $300 million in adjusted free cash flow in fiscal year 2025.
About Carpenter Technology
Carpenter Technology Corporation makes high-performance specialty alloy-based materials and process solutions for critical applications in the aerospace, defense, medical, transportation, energy, industrial, and consumer electronics markets. Founded in 1889, Carpenter Technology 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.