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Investing.com -- Moody’s Ratings has upgraded Carpenter Technology Corporation’s Corporate Family Rating (CFR) to Ba2 from Ba3, while maintaining a positive outlook for the specialty metals producer.
The upgrade reflects expectations that Carpenter’s operating performance, free cash flow, and credit metrics will continue to strengthen over the next 12 to 18 months, supported by robust demand in the aerospace and defense sector, which accounted for about 61% of the company’s net sales.
"The upgrade of Carpenter’s ratings reflects our expectation that its operating performance, free cash flow and credit metrics will continue to strengthen over the next 12 to 18 months as it benefits from strength in its key aerospace and defense end market," said Michael Corelli, Moody’s Ratings’ Senior Vice President and lead analyst for Carpenter Technology.
Moody’s also upgraded Carpenter’s Probability of Default Rating to Ba2-PD from Ba3-PD and the rating on its senior unsecured notes to Ba3 from B1. The company’s Speculative Grade Liquidity rating remains at SGL-1.
Carpenter’s adjusted EBITDA reached a record high of $683 million in fiscal 2025 (ended June 2025), compared to $508 million in fiscal 2024 and $280 million in fiscal 2023. This improvement was driven by strength in aerospace and defense markets, improved productivity, product mix optimization, and strategic pricing actions.
The company is expected to achieve significant growth again in fiscal 2026, potentially generating adjusted EBITDA of around $750 million. This would reduce its leverage ratio to approximately 1.2x and increase interest coverage to about 11.5x by June 2026.
As of June 2025, Carpenter had $315.5 million in cash and $348.9 million of borrowing availability on its $350 million secured revolving credit facility.
The rating could be upgraded if Carpenter sustains higher profitability with EBITDA/interest above 7.5x, debt/EBITDA below 2.5x, and retained cash flow exceeding 30% of net debt. Conversely, downward pressure could emerge if EBITDA/interest falls below 5.0x, debt/EBITDA exceeds 3.5x, or retained cash flow drops below 20% of outstanding debt.
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