PHILADELPHIA, Pa. – Carpenter Technology delivered another record quarter. As a cyclical company, when the times are good, they tend to be very good. When times are bad, well, you do the best you can to conserve capital.
For the third quarter of fiscal 2025, the company, which was founded in Reading in 1889 and maintains large manufacturing facilities in Berks County, reported record operating income and earnings per diluted share. Operating margins also increased substantially, leading to higher profit.
In addition, Carpenter once again adjusted its guidance upward for the next several years.
In a statement, President and CEO of Carpenter Technology, Tony R. Thene said: “With strong earnings and disciplined working capital management, we generated $34.0 million in adjusted free cash flow during the quarter. We utilized our cash to repurchase $37.5 million in shares, bringing total purchases for the fiscal year to $77.8 million.”
Thene also noted that Carpenter expects to carry its operating momentum into the fourth quarter. As a result, the company is raising its guidance again for the full fiscal year 2025, now to the range of $520 million to $527 million in adjusted operating income, a nearly 50 percent increase over fiscal year 2024 and far beyond initial expectations for the year.
“We also anticipate generating $250.0 million to $300.0 million in adjusted free cash flow in fiscal year 2025,” Thene continued. “With meaningful adjusted free cash flow and our strong balance sheet, we are well positioned to sustain our current asset base to achieve our targets, invest in growth initiatives like the recently announced brownfield expansion project and return cash to shareholders.”
According to Thene, Carpenter continues to deliver record results, despite disruptions in the supply chains where it participates. He explains that the company offers a broad portfolio of highly specialized alloys, serving high value applications in high growth end-use markets. Looking beyond fiscal year 2025, Thene sees exceptional growth in the mid and long-term.
“Our goal is to reach $765 million to $800 million in operating income in fiscal year 2027,” he said, “and with strong market fundamentals, continued execution and the brownfield capacity expansion expected to come online in fiscal year 2028, growth will continue beyond fiscal year 2027.”
Third Quarter Results
For the quarter, the company reported operating income of $137.8 million, and earnings per diluted share of $1.88. It delivered adjusted operating margin of 29.1% in the Specialty Alloys Operations (“SAO”) segment, up from 21.4% in the third quarter of the previous year. Operating income of $151.4 million in the SAO segment was up 46% year-over-year.
Year over year, quarterly sales excluding surcharge in the Performance Engineered Products segment rose 2.3% to $96.8 million. Operating income in the segment rose 18.5% to $10.9 million.
Carpenter reported net sales for the third quarter of fiscal year 2025 were $727.0 million, compared with $684.9 million in the third quarter of fiscal year 2024, an increase of $42.1 million or 6%, on a 7% decrease in shipment volume. Net sales excluding surcharge were $597.0 million for the current quarter, an increase of $43.2 million from the same period a year ago.
Earnings per diluted share in the third quarter of fiscal year 2025 were $1.88 compared to earnings of $0.12 per diluted share in the prior year third quarter.
Excluding special items, adjusted earnings per diluted share in the third quarter of fiscal year 2024 were $1.19, Carpenter said. The company explained these results primarily reflect an ongoing improvement in product mix with a shift in capacity to more complex, higher value materials as well as expanding operating efficiencies compared to the prior year period.
Cash provided from operating activities in the third quarter of fiscal year 2025 was $74.2 million compared to $83.4 million in the same quarter last year. Adjusted free cash flow in the third quarter of fiscal year 2025 was $34.0 million, compared to $61.9 million in the same quarter last year. Carpenter said the decrease in operating cash flow and adjusted free cash flow reflects higher pension contributions despite improved earnings. In addition, capital expenditures in the third quarter of fiscal year 2025 were $40.2 million, compared to $21.6 million in the same quarter last year
Total liquidity, according to Carpenter, was $500.4 million at the end of the third quarter of fiscal year 2025. This consisted of $151.5 million in cash and $348.9 million of available borrowings under the company’s credit facility.
Fiscal Year 2025 Outlook
Carpenter said it is raising operating income guidance to the range of $520 million to $527 million in fiscal year 2025. it projects $250 million to $300 million in adjusted free cash flow in fiscal year 2025. Also, Carpenter said it expects $146 million to $153 million in operating income for the fourth quarter of fiscal year 2025.
The company anticipates continued earnings growth beyond fiscal year 2025, with operating income outlook of $765 million to $800 million in fiscal year 2027.
About Carpenter Technology
Carpenter Technology Corporation makes high-performance specialty alloy-based materials and process solutions for 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.
