Carpenter Technology Corporation (CRS) Income Statement

The sequential acceleration in revenue growth, from 2.2% in Q1 FY2026 to 12.6% in Q4 FY2026, indicates strengthening demand, particularly in aerospace/defense. The 12.6% year-over-year growth in Q4 FY2026 is the highest in the reported period, suggesting a broad-based recovery. However, part of this growth may be inflated by raw material surcharges, so underlying volume growth should be monitored.

The consistent quarterly expansion in gross margin, from 21.5% to 31.6% over five quarters, suggests a structural shift toward premium alloys and improved pricing power. This is supported by the company's focus on high-value aerospace and medical products. The margin expansion appears durable, as it is not solely driven by surcharge pass-through, which would compress margins on a percentage basis.

Operating income growth outpaced revenue growth, with operating margin expanding from 20.0% in Q4 FY2025 to 24.3% in Q4 FY2026. This indicates that fixed costs are being absorbed more efficiently as volumes increase. The company's high fixed-cost base and capacity utilization improvements are driving this leverage, which is a key driver of the EPS beat.

SG&A expenses have been stable around $62-65M over the last five quarters, even as revenue grew, demonstrating disciplined overhead management. COGS increased at a slower pace than revenue, contributing to margin expansion. This suggests that the company is not experiencing significant cost inflation beyond raw materials, which are passed through via surcharges.

The inflection point appears to be FY2026, where operating income reached a record $702.0M, up 34% from the prior year. This was driven by a combination of volume growth and margin expansion, with operating margin reaching 22.5% for the full year. The company's strategic focus on premium alloys and the Athens facility's maturation are likely key contributors. This inflection appears sustainable, given the ongoing aerospace upcycle.