Carpenter Technology Corporation Q1 FY2026 earnings call

• Safety performance: Ended the quarter with a total case incident rate of 1.6, committed to 0 injury workplace. • Key takeaways: Record earnings ($153 million adjusted operating income, 31% increase YOY), expanding SAO margins to 32%, strengthening market demand (especially in Aerospace supply chain with highest order intake in over a year), and pricing as a tailwind with elevated pricing and 5 large LTAs with Aerospace customers. • SAO segment: Operating income of $170.7 million, 27% YOY increase, with 32% adjusted operating margin (15th consecutive quarter of margin expansion). • Market demand: Aerospace and Defense bookings accelerated 23% QOQ, with strong demand in engine submarket and increasing positivity from customers. • Pricing: Elevated and increasing, with 5 LTAs with Aerospace customers reflecting strong market outlook.

SAO segment: Net sales excluding surcharge in Q1 FY '26 were $533.9 million, up 5% year-over-year on 11% lower volume, with operating income of $170.7 million and an adjusted operating margin of 32% (15th consecutive quarter of margin expansion). PEP segment: Net sales excluding surcharge in Q1 FY '26 were $87.2 million, down 10% sequentially and 6% year-over-year, with operating income of $9.4 million.

• SAO expected to generate operating income in Q2 FY '26 in the range of $168 million to $172 million. • Total operating income for Q2 FY '26 anticipated to be $152 million to $156 million. • Fiscal year 2027 operating income target of $765 million to $800 million. • Confident in full-year 2026 earnings guidance, with line of sight to high end of range due to volume, pricing, and productivity.

• No specific risks explicitly detailed in the transcript, but general market and supply chain uncertainties could impact performance.

Q: What has happened to jet engine alloy lead times? Are they still extended?

A: Yes, engine lead times are still extended, and the FAA approving a 737 MAX rate increase should lead to increased orders.

Q: How should we think about the duration mix of LTAs moving forward?

A: LTAs range between 2 years and 5 years, with contract lengths staying in this range vs historical 10-year contracts.

Q: Do we see LTA benefits hit in the fiscal second quarter?

A: Varies by contract, some will be earlier in the second half of fiscal year, others further out.

Q: Were engine sales up sequentially or year-on-year?

A: Engine sales were up 14% sequentially and about 20% year-over-year.

Q: Update on the brownfield expansion project?

A: Construction underway, expected to be complete beginning late fiscal '27, early fiscal '28, with $175 million to $185 million of CapEx in fiscal '26 on top of normal CapEx.