Company Performance - Carpenter Technology (CRS) shares have increased by 11.1% over the past month, reaching a new 52-week high of $370.59 [1] - Year-to-date, Carpenter has gained 16%, compared to 16.3% for the Zacks Basic Materials sector and 18.3% for the Zacks Steel - Specialty industry [1] Earnings and Revenue Expectations - Carpenter has consistently beaten earnings estimates, reporting EPS of $2.33 against a consensus estimate of $2.2 in its last earnings report [2] - For the current fiscal year, Carpenter is expected to post earnings of $10.2 per share on revenues of $3.07 billion, reflecting a 36.5% increase in EPS and a 6.59% increase in revenues [3] - For the next fiscal year, expected earnings are $12.13 per share on revenues of $3.37 billion, indicating year-over-year changes of 18.81% in EPS and 9.93% in revenues [3] Valuation Metrics - Carpenter's stock trades at 35.8 times current fiscal year EPS estimates, which is above the peer industry average of 19.1 times [7] - On a trailing cash flow basis, Carpenter trades at 35.1 times compared to the peer group's average of 13.8 times [7] - The stock has a PEG ratio of 1.44, which does not place it among the top echelon of stocks from a value perspective [7] Zacks Rank and Style Scores - Carpenter currently holds a Zacks Rank of 2 (Buy) due to favorable earnings estimate revisions from analysts [8] - The company has a Value Score of F, while its Growth and Momentum Scores are A and B, respectively, resulting in a VGM Score of B [6] Industry Comparison - Insteel Industries, Inc. (IIIN), a peer in the industry, also has a Zacks Rank of 2 (Buy) and shows strong earnings performance, beating consensus estimates by 18.18% [10][11] - IIIN is expected to post earnings of $3.04 per share on revenues of $741 million for the current fiscal year, with shares gaining 10.4% over the past month [11] - The Steel - Specialty industry ranks in the bottom 69% of all industries, but there are positive tailwinds for both CRS and IIIN [12]

Core Viewpoint - Insteel Industries (IIIN) is currently viewed as a better value opportunity compared to Carpenter Technology (CRS) based on various valuation metrics and earnings outlooks [1]. Group 1: Zacks Rank and Earnings Outlook - Both IIIN and CRS have a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions for both companies [3]. - The improving earnings outlook for both stocks provides a level of comfort for investors [3]. Group 2: Valuation Metrics - IIIN has a forward P/E ratio of 11.56, significantly lower than CRS's forward P/E of 33.21 [5]. - The PEG ratio for IIIN is 0.96, while CRS has a PEG ratio of 1.34, suggesting that IIIN may offer better value relative to its expected earnings growth [5]. - IIIN's P/B ratio stands at 1.9, compared to CRS's P/B of 8.5, further indicating that IIIN is undervalued [6]. - Based on these valuation figures, IIIN earns a Value grade of B, while CRS receives a Value grade of D [6].

Core Insights - Carpenter Technology Corporation (CRS) reported adjusted earnings of $2.33 per share for Q2 fiscal 2026, exceeding the Zacks Consensus Estimate of $2.20 and significantly up from $1.66 in the same quarter last year, driven by product mix improvements and operational efficiencies [1][9] - Net revenues increased by 7.5% year over year to $728 million, slightly missing the Zacks Consensus Estimate of $729 million [2][9] - The company expects operating income for fiscal 2026 to be in the range of $680-$700 million, an increase from the previously stated $660-$700 million [10] Revenue Performance - Aerospace and Defense market revenues increased by 15.3% year over year, while Energy market revenues rose by 19.3%. However, Medical market revenues decreased by 22.3%, and Distribution market revenues fell by 14.1%. Industrial and Consumer markets saw a revenue increase of 10.1%, while Transportation market revenues dropped by 19.2% [3] - The cost of goods sold rose by 2.1% year over year to $510 million, with gross profit increasing by 23% to $218 million, resulting in a gross margin of 30%, up from 26.2% in the prior year [3] Operational Results - Adjusted operating income reached a record $155 million, compared to $119 million in the prior year, with an adjusted operating margin of 21.3%, up from 17.6% [4][9] - Specialty Alloys Operations segment reported sales of $662 million, up from $602 million year over year, but below the estimated $672 million. The segment's operating profit was $175 million, exceeding the estimate of $171 million [5] - Performance Engineered Products segment saw a 12.4% decline in net sales to $83 million, missing the estimate of $99 million, with an operating profit of $6.9 million, down 1.4% year over year [6] Cash Flow and Balance Sheet - At the end of Q2 fiscal 2026, cash and cash equivalents were $232 million, down from $315.5 million at the end of fiscal 2025. Long-term debt decreased slightly to $690 million from $695 million [7] - Cash flow from operating activities was $132 million in the quarter, compared to $68 million in the prior year [7] Share Price Performance - CRS shares have surged by 66.9% over the past year, compared to the industry's growth of 72.6% [11]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Core Insights - Carpenter Technology reported record profitability for its fiscal 2026 second quarter, driven by pricing momentum, expanding margins, and strengthening demand, particularly in aerospace and defense [3][6][18] Financial Performance - Total company sales excluding raw material surcharge increased by 8% year-over-year but decreased by 2% sequentially, attributed to typical year-end factors [1] - The company generated $155 million in operating income for the quarter, a 31% increase compared to the previous quarter [2][6] - Gross profit rose to $218.3 million, reflecting a 23% year-over-year increase [8] Segment Performance - Specialty Alloys and Operations (SAO) segment achieved an adjusted operating margin of 33.1%, up from 28.3% a year earlier [2] - Aerospace and defense sales were down 1% sequentially but up 15% year-over-year, with bookings increasing by 8% sequentially and commercial aerospace bookings up 23% [7] - Medical sales declined by 7% sequentially and 22% year-over-year, primarily due to reduced demand for specific titanium products [7] - Energy sales decreased by 10% sequentially but increased by 19% year-over-year, driven by power generation demand [7] Cash Flow and Capital Allocation - The company generated $132.2 million from operations and $85.9 million in adjusted free cash flow for the quarter [4][11] - Carpenter repurchased $32.1 million of stock, totaling $183.1 million under a $400 million program [12] - Total liquidity at quarter-end was $730.8 million, including $231.9 million in cash [13] Market Dynamics and Guidance - Management noted strengthening demand in aerospace and defense, with bookings up 8% sequentially and constrained nickel-based superalloy supply [5][16] - The company raised its full-year fiscal 2026 operating income guidance to $680 million to $700 million, representing a 30% to 33% increase over fiscal 2025 [18]

Financial Performance - Net sales for the three months ended December 31, 2025, increased to $728.0 million, up 7.9% from $676.9 million in the same period of 2024[11] - Gross profit for the six months ended December 31, 2025, rose to $434.7 million, representing a 22.8% increase compared to $353.8 million in 2024[11] - Operating income for the three months ended December 31, 2025, was $155.2 million, a 30.6% increase from $118.9 million in the prior year[11] - Net income for the six months ended December 31, 2025, reached $227.8 million, up 34.7% from $168.9 million in 2024[14] - For the three months ended December 31, 2025, net income was $105.3 million, an increase of 25.7% compared to $84.1 million in the same period of 2024[49] - Basic earnings per common share for the three months ended December 31, 2025, was $2.10, up 25.0% from $1.68 in 2024[49] - Consolidated operating income for the three months ended December 31, 2025, was $155.2 million, compared to $118.9 million in the same period of 2024, marking an increase of 30.6%[105] - Segment operating income for the six months ended December 31, 2025, was $361.5 million, compared to $284.5 million in 2024, reflecting a significant increase of 27.1%[107] - Consolidated operating income rose to $308.6 million for the six months ended December 31, 2025, compared to $232.5 million in 2024, marking an increase of 32.7%[107] Assets and Liabilities - Cash and cash equivalents decreased to $231.9 million as of December 31, 2025, from $315.5 million at the end of June 2025[9] - Total assets increased to $3,504.3 million as of December 31, 2025, compared to $3,486.8 million as of June 30, 2025[9] - Total liabilities decreased to $1,518.9 million as of December 31, 2025, down from $1,599.8 million at the end of June 2025[9] - Total accrued liabilities decreased to $142.7 million as of December 31, 2025, from $216.3 million as of June 30, 2025[52] - The carrying value of long-term debt was $690.1 million as of December 31, 2025, with a fair value of $713.0 million[72] Cash Flow and Investments - Net cash provided from operating activities for the six months ended December 31, 2025, was $171.4 million, an increase from $108.1 million in 2024[16] - The company plans to continue investing in property, plant, and equipment, with purchases amounting to $88.9 million for the six months ended December 31, 2025[16] - Capital expenditures for the six months ended December 31, 2025, totaled $88.9 million, up from $56.2 million in 2024, indicating a 58.2% increase[111] Shareholder Returns - Cash dividends declared were $0.40 per share, totaling $20.1 million for the six months ended December 31, 2025[20] - The company authorized a share repurchase program of up to $400.0 million for its outstanding common stock, with $216.9 million remaining available for future purchases as of December 31, 2025[68] - During the six months ended December 31, 2025, the company repurchased 300,000 shares for an aggregate of $81.2 million[68] Revenue by Sector - Revenue from the Aerospace and Defense sector for the three months ended December 31, 2025, was $472.0 million, up from $413.4 million in 2024, reflecting a growth of approximately 14.1%[44] - Revenue from the Medical sector for the three months ended December 31, 2025, was $70.7 million, down from $86.3 million in 2024, indicating a decline of approximately 18.0%[44] - The SAO segment reported sales of $659.3 million for the three months ended December 31, 2025, an increase from $597.8 million in 2024, representing a growth of 10.3%[105] - The PEP segment reported sales of $68.7 million for the three months ended December 31, 2025, down from $79.1 million in 2024, reflecting a decline of 13.9%[105] Accounting and Compliance - The company is currently evaluating the potential impact of the adoption of ASU 2025-06 on its consolidated financial statements and related disclosures[31] - The Company expects to adopt ASU 2025-09 and ASU 2025-12, which are effective for fiscal years beginning after December 15, 2026, but the impact on financial statements is still being evaluated[32][33] - The Company adopted ASU 2023-07 in Q4 of fiscal year 2025, which requires additional disclosures about reportable segment expenses but did not materially impact consolidated financial statements[34] Environmental and Legal Matters - The company recorded environmental remediation liabilities of $17.5 million as of December 31, 2025, slightly up from $17.4 million as of June 30, 2025[65] - The company is exposed to potential future costs related to environmental remediation, which may not materially affect long-term financials but could impact specific future quarters[66] - The company has been involved in various routine claims and legal actions, but management believes these will not have a material effect on long-term financials[67] Derivative Instruments and Risk Management - The company has derivative financial instruments with a fair value of $0.2 million in assets and $1.2 million in liabilities as of December 31, 2025[71] - The company has forward contracts to purchase 0.2 million pounds of certain raw materials with settlement dates through January 2027[78] - The company reported a total liability from derivative contracts of $1.2 million as of December 31, 2025[82] - The company does not anticipate nonperformance by any counterparties on its derivative instruments, supported by master netting arrangements[84] - The company has historically used commodity forward contracts, interest rate swaps, and foreign currency forwards to manage risks associated with price fluctuations[77]

Financial Performance - Operating income for Q2 FY26 reached $155.2 million, a 31% increase year-over-year from $118.9 million in Q2 FY25[11]. - Net sales for Q2 FY26 were $728.0 million, up 7.5% from $676.9 million in Q2 FY25, with net sales excluding surcharge revenue at $589.1 million, a 7.5% increase year-over-year[23]. - Adjusted operating margin for Q2 FY26 was 26.3%, up from 21.7% in Q2 FY25, marking the sixteenth consecutive quarter of margin expansion[23]. - Q2 profits increased by 31% year-over-year, with adjusted operating margins now at 33.1%[45]. - FY26 operating income expected to be 30% to 33% higher than record FY25, indicating continued earnings growth[45]. - Adjusted earnings per diluted share excluding special items for Q2-26 was $2.33, compared to $1.66 in Q2-25[52]. Cash Flow and Capital Allocation - The company generated $132.2 million in cash from operating activities and expects to generate at least $280 million of adjusted free cash flow in fiscal year 2026[34]. - The company repurchased $32.1 million of stock in the current quarter, totaling $183.1 million against a $400.0 million authorization[34]. - Adjusted free cash flow expected to be at least $280 million in fiscal year 2026[42]. - Adjusted free cash flow for Q2-26 was $85.9 million, compared to $51.9 million in the same period last year[53]. - Strong balance sheet and cash flow generation enable balanced capital allocation, including dividends and share repurchase programs[45]. Market and Segment Performance - Aerospace and Defense segment saw a 23% sequential increase in bookings, driven by ramping production rates and elevated MRO activity[15]. - Net sales in the Aerospace and Defense segment increased by 60.1% year-over-year, contributing significantly to overall revenue growth[24]. - The company completed negotiations for three additional aerospace long-term agreements (LTAs) with significant pricing increases, indicating strong pricing power in the current market[39]. - Aerospace industry targeting build rate increase of ~50% over 2025 rate and ~35% over pre-COVID high[42]. - Anticipated strengthening in volume, productivity, and favorable pricing actions due to supply-demand imbalance[45]. Future Outlook - Q3 FY26 operating income is expected to be in the range of $195 million to $200 million, reflecting strong demand and productivity efforts[27]. - Management expects FY27 not to be the peak of earnings growth, with market dynamics strengthening[45]. - The effective tax rate for Q2 FY26 was 19.0%, compared to 20.0% in Q2 FY25[23].

Core Insights - Carpenter Technology reported $728 million in revenue for the quarter ended December 2025, marking a year-over-year increase of 7.6% and an EPS of $2.33 compared to $1.66 a year ago, with an EPS surprise of +5.79% [1] Financial Performance - Revenue of $728 million was slightly below the Zacks Consensus Estimate of $728.57 million, resulting in a surprise of -0.08% [1] - The consensus EPS estimate was $2.20, leading to an EPS surprise of +5.79% [1] Key Metrics - Carpenter's shares returned +5.3% over the past month, outperforming the Zacks S&P 500 composite's +0.8% change, and the stock holds a Zacks Rank 2 (Buy) [3] - Volumes Sold in Pounds for Specialty Alloys Operations were 46.84 million, exceeding the average estimate of 44.86 million [4] - Total Volumes Sold in Pounds reached 48.4 million, surpassing the average estimate of 46.45 million [4] - Net Sales from the End-Use Market Excluding Surcharge Revenue totaled $589.1 million, slightly below the average estimate of $598.21 million, but reflecting a year-over-year change of +7.5% [4] - Surcharge revenue was reported at $138.9 million, exceeding the estimated $133.03 million, with a year-over-year increase of +7.8% [4] - Net Sales for Performance Engineered Products were $83.2 million, below the average estimate of $97.43 million, indicating a year-over-year decline of -12.4% [4] - Operating Income for Specialty Alloys Operations was $174.6 million, slightly above the average estimate of $170.94 million [4]

Financial Data and Key Metrics Changes - The company reported record operating income of $155 million for the second quarter, a 31% increase compared to the same quarter of fiscal year 2025 [4][15] - Adjusted operating margin for the SAO segment reached 33.1%, up from 28.3% a year ago and 32% in the prior quarter [6][17] - Adjusted earnings per diluted share was $2.33 for the quarter, excluding the impact of debt refinancing [15][16] Business Line Data and Key Metrics Changes - SAO segment net sales excluding surcharge were $527.3 million, up 10% year-over-year, while PEP segment net sales were $77.2 million, down 11% sequentially and down 10% year-over-year [16][18] - SAO reported operating income of $174.6 million, a 29% increase year-over-year, while PEP reported operating income of $6.9 million [7][18] Market Data and Key Metrics Changes - Sales in the aerospace and defense end-use market were down 1% sequentially but up 15% year-over-year, with aerospace engine materials order intake up 30% sequentially [9][10] - Medical end-use market sales were down 7% sequentially and 22% year-over-year, primarily due to specific titanium product demand [11] - Energy end-use market sales were down 10% sequentially but up 19% year-over-year, driven by power generation demand [12] Company Strategy and Development Direction - The company is focused on capital allocation towards growth projects and returning cash to shareholders through share repurchases and dividends [20][21] - A brownfield capacity expansion project is underway, aimed at increasing production capacity for nickel-based superalloys [30][36] - The company anticipates continued strong demand in aerospace and defense markets, with a focus on securing long-term agreements with customers [32][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing strength of the aerospace demand environment, citing significant increases in order intake and production rates [23][25] - The company raised its fiscal year 2026 operating income guidance to $680 million-$700 million, reflecting a 30%-33% increase over the previous fiscal year [34][37] - Management noted that pricing actions will continue to be a positive tailwind due to supply-demand imbalances in the nickel-based superalloy market [33] Other Important Information - The company generated $132.2 million in cash from operating activities and expects to generate at least $280 million of adjusted free cash flow in fiscal year 2026 [20][22] - Total liquidity was reported at $730.8 million, including $231.9 million in cash [22] Q&A Session Summary Question: How broad-based is the participation of airframe customers in ordering? - Management noted increased activity across all aerospace sub-markets, with significant sequential increases in engine orders and structural customer orders coming off the sidelines [41][42] Question: What visibility is there regarding the defense sub-market orders? - Management indicated that there is pent-up demand from the defense sub-market due to previous government shutdowns, and orders are expected to come back rapidly [43][44] Question: Is pricing still trending higher? - Management confirmed that pricing remains strong, with no discounts on premium aerospace products, and expects continued upward pricing trends [45][48] Question: How did engine and fastener sales trend during the quarter? - Sales were relatively flat quarter-over-quarter, but year-over-year sales showed substantial increases across all aerospace sub-markets [83][84] Question: What is the outlook for the additive business? - Management sees potential for growth in the additive business, with improved adoption rates and increased activity from large customers [86][88]

Financial Data and Key Metrics Changes - The company reported record operating income of $155 million for the second quarter, a 31% increase compared to the same quarter of fiscal year 2025 [4][15] - Adjusted operating margin reached 33.1%, up from 28.3% year-over-year and 32% sequentially [6][17] - Total sales, excluding raw material surcharge, increased by 8% year-over-year but decreased by 2% sequentially [9][14] Business Line Data and Key Metrics Changes - The SAO segment generated $527.3 million in net sales, a 10% increase year-over-year, while the PEP segment saw net sales of $77.2 million, down 10% year-over-year [16][18] - SAO reported operating income of $174.6 million, a 29% year-over-year increase, while PEP's operating income was $6.9 million, down from $9.4 million in the previous quarter [7][18] Market Data and Key Metrics Changes - Sales in the aerospace and defense in-use market were up 15% year-over-year, with commercial aerospace bookings increasing by 23% sequentially [10][11] - The medical in-use market saw a 22% year-over-year decline, primarily due to specific titanium product demand issues [11] - Energy in-use market sales were up 19% year-over-year, driven by power generation demand [12] Company Strategy and Development Direction - The company is focused on expanding its capacity for nickel-based superalloys, with a brownfield capacity expansion project underway [30][36] - Long-term agreements with aerospace customers have been established, reflecting a commitment to securing supply and pricing stability [32][71] - The company aims to balance capital allocation between growth investments and shareholder returns, including share repurchases and dividends [21][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the aerospace demand environment, citing significant increases in order intake and production rates from major customers like Boeing [23][24] - The company raised its fiscal year 2026 operating income guidance to $680 million-$700 million, reflecting a 30%-33% increase over the previous fiscal year [34] - Management noted that pricing actions will continue to be a positive tailwind due to supply-demand imbalances in the nickel-based superalloy market [33][48] Other Important Information - The company generated $132.2 million in cash from operating activities and expects to generate at least $280 million of adjusted free cash flow for fiscal year 2026 [20][21] - The effective tax rate for the quarter was 19%, lower than anticipated due to discrete tax benefits [15] Q&A Session Summary Question: How broad-based is the participation of airframe customers in ordering? - Management noted increased activity across all aerospace sub-markets, with significant sequential increases in engine orders and structural customer orders coming off the sidelines [41][42] Question: What visibility is there regarding the defense sub-market orders? - Management indicated that there is pent-up demand from the defense sub-market due to previous government shutdowns, and orders are expected to pick up rapidly [43][44] Question: Is pricing still trending higher? - Management confirmed that pricing remains strong, with no discounts on premium aerospace products, and expects continued upward pricing trends [45][48] Question: How did engine and fastener sales trend during the quarter? - Sales were relatively flat quarter-over-quarter, but year-over-year growth was substantial across all aerospace sub-markets [83][84] Question: What is the outlook for the additive business? - Management sees potential for growth in the additive business, driven by higher adoption rates and increased activity with large customers [86][88]