Moody’s Upgrades Carpenter Technology’s Credit Rating to Ba2 Citing Strength in Aerospace Sector
Investing.com – In a recent credit rating update, Moody’s Ratings has upgraded Carpenter Technology Corporation’s Corporate Family Rating (CFR) to Ba2 from Ba3, maintaining a positive outlook for the specialty metals manufacturer. This move reflects Moody’s confidence in Carpenter Technology’s improving operational performance and financial metrics, largely driven by robust demand within the aerospace and defense markets, which constitute approximately 61% of the company’s net revenue.
Michael Corelli, Senior Vice President and lead analyst at Moody’s responsible for Carpenter Technology, noted, “The upgrade reflects our expectations that Carpenter’s operational performance, free cash flow, and credit metrics will continue to strengthen over the next 12 to 18 months due to the company’s exposure to strong aerospace and defense markets — key drivers for the business.”
Alongside the CFR upgrade, Moody’s also raised Carpenter’s Probability of Default (PD) rating to Ba2-PD from Ba3-PD, and its senior unsecured bond rating improved to Ba3 from B1. The company’s liquidity rating remains at SGL-1, signaling stable liquidity conditions at the speculative-grade level.
Record EBITDA and Strong Financial Outlook
Carpenter Technology reported an adjusted EBITDA record of $683 million for fiscal year 2025, ending June 2025, compared to $508 million in fiscal 2024 and $280 million in fiscal 2023. This substantial growth was fueled by strength in aerospace and defense demand, enhanced productivity, optimized product mix, and strategic pricing initiatives.
Looking ahead, Carpenter anticipates continued substantial growth in fiscal 2026, projecting adjusted EBITDA around $750 million. This increase is expected to reduce the company’s leverage ratio to roughly 1.2x and improve interest coverage ratios to approximately 11.5x as of June 2026. As of June 2025, Carpenter held $315.5 million in cash and had access to $348.9 million of borrowing capacity under its secured revolving credit facility valued at $350 million.
Potential Future Rating Adjustments
Moody’s indicates that further rating upgrades for Carpenter could occur if the company maintains higher profitability with EBITDA-to-interest coverage exceeding 7.5x, total debt to EBITDA below 2.5x, and retained cash flow greater than 30% of net debt. Conversely, downward rating pressure could result if EBITDA-to-interest coverage falls below 5.0x, total debt to EBITDA exceeds 3.5x, or retained cash flow drops below 20% of outstanding debt.
This update underscores the strengthening fundamentals of Carpenter Technology as it leverages its prominent position in the aerospace and defense industry to improve financial stability and creditworthiness, reflecting positive market dynamics and effective corporate strategies.
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