Earnings Recap — Q4 FY2026
CY Q3 2026 · Reported July 30, 2026 · Beat 7 of last 7 quarters
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Carpenter Technology's record results and accelerating demand across aerospace, defense, and energy (IGT) underscore the ongoing AI infrastructure buildout, as data center power demand drives industrial gas turbine orders and semiconductor fabrication expansion. The company's ability to expand margins while investing in brownfield capacity positions it to capture incremental demand from these AI-related end markets, with management signaling continued growth beyond FY2029.
Carpenter Technology delivered another record quarter, with total operating income of $206.9M, up 37% year-over-year and 11% sequentially, driven by record SAO segment performance. SAO operating income reached $229.7M with a record 37.8% adjusted operating margin, while PEP operating income was $7.1M. Sales excluding surcharge increased 9% year-over-year on 22% higher volume, with aerospace and defense sales up 17% year-over-year and industrial/consumer up 22% year-over-year, partially offset by medical down 30% and energy down 12%. The company generated $240.1M in operating cash flow and $155M in adjusted free cash flow in the quarter, and repurchased $45.2M of shares. The quarter was also marked by the sudden passing of CEO Brian Malloy, with Tony Thene reappointed as CEO on a permanent basis.
Management guided Q1 FY2027 operating income of $195M–$200M, up 27%–30% year-over-year, and full-year FY2027 operating income of $850M–$880M, representing 21%–25% growth over the record FY2026. They reaffirmed the FY2029 operating income target of approximately $1.2B–$1.3B, implying a 20%+ 3-year CAGR, and noted this is not the peak of earnings power. The brownfield capacity expansion remains on budget and on schedule for completion by early FY2028, with incremental operating income expected in FY2028. Management emphasized that guidance is set with high confidence and is a 'floor,' with Tony Thene stating, 'if you want to consider FY '27 to floor, you won't get any pushback from me.' They also expect aerospace and defense demand to accelerate as Boeing and Airbus ramp build rates, and see continued strength in IGT (data center) and semiconductor demand.
“if you want to consider FY '27 to floor, you won't get any pushback from me”
on Guidance as floor
“We see this reflected in the sequential increase in bookings for the aerospace and defense end-use market. And we heard this confidence from customers at the Farnborough International Air Show just last week.”
on Aerospace demand
“The same dynamics that drove our success in fiscal year 2026 are only strengthening as we look ahead over the next several years.”
on Long-term outlook
Can you share what the FY '29 EBIT guide assumes with respect to the brownfields contribution to earnings?
Tim Lain said the brownfield project is on track, on schedule, and on budget, coming online early FY2028. In FY2028, it will be OI incremental, and the contribution will ramp toward the $150M incremental OI target for 2030, with the FY2029 contribution likely weighted more toward the 2030 number. Tony Thene added that the $150M target is maintained because the exact product mix is not yet known, though pricing trends have increased confidence.
I wanted to ask if lead times have changed much at all on engine or other products.
Tony Thene said lead times are relatively consistent quarter-over-quarter, but some specific products are pushing out. He noted that lead times are expected to accelerate significantly over the next quarter and the rest of the calendar year.
Can you share how your share position has changed or not changed on newer LTAs, particularly with the large engine manufacturers?
Tony Thene said that every aerospace contract they are working on asks for more material, not less, and that customers are wanting Carpenter's share of their needs to be higher with each contract.