Carpenter Technology: F4Q Results: Healthy Reset Offers Attractive Entry Point with Constructive L-T Guide

First-page research excerpt

J P M O R G A N

North America Equity Research

31 July 2026

Carpenter Technology

F4Q Results: Healthy Reset Offers Attractive Entry

Point with Constructive L-T Guide

Overweight

CRS, CRS US

Price (30 Jul 26):$503.71

▼Price Target (Dec-27):$700.00

Prior (Dec-27):$705.00

CRS reported F4Q EBIT of $207M, in-line with guidance but slightly below preprint BBG (-2%). Despite risk-on sentiment, shares ended the day -5%,

underperforming peer ATI (+2%) and XME (+4%). We had placed shares on Negative

Catalyst Watch into the print (link) as we felt the risk-reward skewed negative — mix

weighing on ASPs, downside to FY27 buy-side expectations, and precedent of recent

earnings day underperformance. We also sense the in-line print caught some investors

off guard given worse-than-expected ASP deceleration (SAO ASPs -10% Y/Y),

which was ultimately mix driven (industrials/consumer +21% Y/Y). Nonetheless,

SAO had record 37.8% margins and commercial aero demand remained strong

(engines/structural +30%/+25% Y/Y). The new FY27 EBIT guide ($850-880M) was

in-line with BBG, but below buy-side expectations (~$900M), although CEO Tony

Thene didn’t dismiss this could be a “floor” for the year. Conversely, the new L-T

guide (FY29 $1.2-1.3B), which includes >$75M run-rate Athens brownfield

contribution, implies a robust ~20% 2yr CAGR off FY27’s mid-point, ahead of

expectations closer to 15%. Considering recent precedent of shares outperforming

XME by 1,500bps on avg. post earnings (T+30), we view today’s healthy pullback as

an attractive entry point. Demand/pricing momentum continues to grow, and

structural A&D orders, which are tracking behind forthcoming build rate upgrades,

will need to accelerate in the coming quarters to keep pace, driving further margin

expansion. We remain OW-rated CRS.

F4Q26 takeaways: SAO EBIT rose 37% Y/Y (+1% vs. guide), with record

margins growing >1,200bps. Better-than-expected shipments (+12% vs.

BBG) jumped 23% Y/Y, partly due to heavy industrials/consumer mix (+19%

Q/Q; 14% share; ), which requires less time on assets, but at lower ASPs (-6%

Q/Q). Within this bucket, semiconductors were a key driver (~30% share),

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