Carpenter Technology Corp Q2 2025 Earnings Call: Key Highlights and Record-Setting Operating Income Insights

• Operating Income: $119 million, up 70% from last year’s second quarter.

• SAO Segment Adjusted Operating Margin: 28.3%, a rise from 20% last year.

• Adjusted Free Cash Flow: $38.6 million for the quarter.

• Sales Increase: 13% compared to last year, though down 5% from the previous quarter.

• Gross Profit: $177.5 million, which is a 45% increase from last year.

• SG&A Expenses: Totaled $58.6 million, including $23.6 million in corporate costs.

• Effective Tax Rate: 20% for this quarter.

• Earnings Per Diluted Share: $1.66 for the quarter.

• SAO Segment Net Sales: $479.6 million, reflecting a 15% increase year-over-year.

• PEP Segment Net Sales: $86.2 million, down 2% from a year ago.

• Cash from Operating Activities: $67.9 million this quarter.

• Capital Expenditures: Just over $29 million for the quarter.

• Share Repurchase: $8.2 million worth of shares bought back this quarter.

• Total Liquidity: $511 million, including $162.1 million in cash.

• Fiscal Year 2025 Operating Income Guidance: Increased to between $500 million and $520 million.

Release Date: January 30, 2025

• Carpenter Technology Corp (NYSE:CRS) achieved impressive results this quarter, posting $119 million in operating income, marking a significant increase from the second quarter last year.

• The SAO segment improved its operating margin due to better productivity and an optimized product mix.

• The company generated solid free cash flow while continuing to repurchase shares.

• Looking ahead, Carpenter Technology has raised its operating income forecast for fiscal year 2025.

• Demand in the Aerospace and Defense market remains strong, driven by maintenance and defense needs.

• Sales dipped 5% sequentially, impacted by customer shutdowns during the holiday season.

• The PEP segment faced challenges, showing a 7% drop in sales due to some order delays.

• There was a slight fall in orders this quarter, mainly from Boeing-related customers.

• Lead times for products are still long but have improved in some areas.

• The Medical market is seeing some destocking, but overall demand looks promising.

Q: What about lead times in the engine channel and issues with Boeing? A: CEO Tony Thene mentioned that lead times are improving due to productivity gains. Orders dropped slightly, partly affected by Boeing’s strike, but the aero engines market had a rise in orders.

Q: How are you meeting long-term demand in a challenging environment? A: Tony Thene confirmed that Carpenter Technology is operating at full capacity, ready to adapt to market needs.

Q: Can you share your thoughts on pricing and product mix? A: Tony Thene noted that while pricing fluctuates, long-term discussions focus on ensuring reliable supply and maximizing profits through optimizing the product mix.

Q: What’s the outlook for the Medical market? A: Tony Thene expressed optimism, citing a positive long-term demand driven by rising surgical rates and customer interest in new products from Carpenter Technology.