Core Viewpoint - Central Garden & Pet reported a narrower-than-expected loss in Q4 fiscal 2025, with both revenue and earnings exceeding estimates, indicating operational momentum and a strong fiscal year performance [2][3]. Financial Performance - The company posted an adjusted loss of 9 cents per share, better than the Zacks Consensus Estimate of a loss of 20 cents, and improved from an 18-cent loss in the prior year [3]. - Net sales reached $678.2 million, a 1% increase year-over-year, surpassing the Zacks Consensus Estimate of $666 million, driven by strong performance in the Garden segment [4]. - Gross profit increased to $196.5 million from $169 million a year ago, with gross margin expanding 380 basis points to 29% [5]. - The operating loss was $6.4 million, significantly improved from a $32.4 million loss reported a year earlier [6]. Segment Performance - The Pet segment generated $428 million in sales, down 2% year-over-year, impacted by the planned closure of U.K. operations [7]. - The Garden segment saw a 7% increase in net sales to $250 million, with strong performance in various product categories [9]. Financial Health - The company ended the quarter with cash and cash equivalents of $882.5 million and long-term debt of $1,191.6 million, resulting in a gross leverage ratio of 2.8 [12]. - Cash provided by operating activities was $332.5 million in fiscal 2025, compared to $394.9 million the previous year [12]. Outlook - Central Garden & Pet anticipates adjusted earnings of $2.70 per share or better for fiscal 2026, supported by margin discipline and cost efficiencies [14]. - For Q1 fiscal 2026, the company projects earnings in the range of 10-15 cents per share, down from 21 cents reported in the prior year [15]. - The consensus estimate has seen a downward trend, with a shift of -46.97% in recent estimates [16].

Core Insights - Central Garden & Pet Company (CENT) reported its fourth-quarter fiscal 2025 results, with both revenue and earnings exceeding Zacks Consensus Estimates and showing improvement from the previous year, marking a record fiscal year for the company [1][2][10] Financial Performance - The company posted an adjusted loss of 9 cents per share, better than the expected loss of 20 cents and an improvement from the 18-cent loss in the prior-year quarter [2] - Net sales reached $678.2 million, a 1% increase year over year, surpassing the Zacks Consensus Estimate of $666 million, driven by strong performance in the Garden segment [3] - Gross profit increased to $196.5 million from $169 million a year ago, with gross margin expanding by 380 basis points to 29% [4] - Adjusted EBITDA rose to $25.7 million, up from $16.8 million in the previous year [5] Segment Performance - The Pet segment generated $428 million in sales, down 2% year over year, impacted by the closure of U.K. operations and reduced sales of lower-margin products, although it gained market share in consumables [7] - The Garden segment saw a 7% increase in net sales to $250 million, benefiting from favorable weather and an extended selling season, with e-commerce demand growing significantly [9] Cost and Expenses - Adjusted SG&A expenses rose 7% to $198.1 million, representing 29.2% of net sales, driven by productivity investments and higher spending on innovation [6] Financial Health - The company ended the quarter with cash and cash equivalents of $882.5 million and long-term debt of $1,191.6 million, with a gross leverage ratio of 2.8 [12] Outlook - For fiscal 2026, the company anticipates adjusted earnings of $2.70 per share or better, supported by margin discipline and strategic investments in innovation and digital technology [14] - For the first quarter of fiscal 2026, earnings are projected to be between 10-15 cents per share, down from 21 cents in the prior year [15]

Financial Data and Key Metrics Changes - For Q4 FY 2025, Carpenter Technology generated $151 million in adjusted operating income, a 21% increase from FY 2024 and a 10% increase from the previous quarter [6][15] - The adjusted operating margin for the SAO segment reached 30.5%, up from 25.2% a year ago [6][42] - The company generated $201.3 million in adjusted free cash flow during the quarter, with a total of $287.5 million for the fiscal year [7][27] Business Line Data and Key Metrics Changes - The SAO segment reported operating income of $167 million, a 19% year-over-year increase [7][17] - PEP segment net sales were $97.1 million, down 5% year-over-year but operating income improved to $11.7 million [18][19] - Sales in the aerospace and defense market increased 3% sequentially and 2% year-over-year, with engine sales up 5% sequentially [8][9] Market Data and Key Metrics Changes - Sales in the medical market were up 6% sequentially but down 16% compared to the record prior year [11] - The energy market saw a 27% sequential increase and a 22% year-over-year increase in sales [11] - The aerospace supply chain is experiencing increased activity as build rates ramp up, with strong demand for materials [10][12] Company Strategy and Development Direction - Carpenter Technology is focused on achieving a zero injury workplace and improving safety performance [5] - The company plans to continue investing in its brownfield capacity expansion project, which is expected to enhance growth starting in FY 2028 [22][39] - The strategic focus remains on increasing productivity, optimizing product mix, and maintaining pricing power in a strong demand environment [26][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing ramp in aerospace demand and the positive outlook for the defense sector [10][34] - The company anticipates a strong start to FY 2026, projecting operating income between $660 million and $700 million, representing a 26% to 33% increase over FY 2025 [29][42] - Management highlighted the importance of maintaining operational efficiency through preventive maintenance to support long-term growth [72][74] Other Important Information - The effective tax rate for Q4 FY 2025 was 19.7%, lower than anticipated due to discrete tax benefits [16] - The company ended the fiscal year with $664.4 million in total liquidity, including $315.5 million in cash [23][24] - Carpenter Technology executed $101.9 million in share repurchases during FY 2025, reflecting its commitment to returning cash to shareholders [28][42] Q&A Session Summary Question: Can you discuss lead times and pricing expectations? - Management indicated that lead times remain extended, particularly in jet engines, and pricing actions are expected to continue as a tailwind due to a significant supply-demand gap [48][50][52] Question: Is the initial FY 2026 EBIT guidance conservative? - Management confirmed that the guidance is based on internal assessments and is designed to be achievable without overexposing the company [57][58] Question: Are there orders supporting a reacceleration in aerospace and defense volumes? - Management noted that there is a positive trend in orders, particularly in the defense sector, with increased bookings observed [60][64] Question: How does the company view the urgent requests in defense versus regular orders? - Management explained that defense orders are historically uneven but have seen an increase recently, with expectations for elevated order levels moving forward [70][71] Question: What is the outlook for power generation revenues? - Management highlighted significant year-over-year growth in power generation revenues, indicating a strategic advantage in this market [76][66] Question: Will there be further mix gains in FY 2026? - Management expects to see continued growth in aerospace and medical markets, which will strengthen the overall product mix [82][87]

Financial Data and Key Metrics Changes - Consolidated net sales increased by 3.1% to $364.3 million, surpassing the previous year's strong results [21][7] - Gross profit decreased by 1.8% to $128 million, with a gross margin of 35.1%, down 180 basis points year over year [21][22] - Adjusted operating income increased by 9.6% to $73.1 million, with an adjusted operating margin improving by 120 basis points to 20.1% [23][24] - Adjusted EBITDA reached a record $84.5 million, up 2.8% year over year, with an adjusted EBITDA margin of 23.2% [24] - Adjusted net income per diluted share increased by 13.3% to $0.34, setting a new second quarter record [25] Business Line Data and Key Metrics Changes - Water Flow Solutions (WFS) net sales increased by 5.1% to $216.2 million, driven by higher volumes of iron gate and specialty valves [25] - Water Management Solutions (WMS) net sales increased by 0.3% to $148.1 million, primarily due to increased volumes of repair products [27] Market Data and Key Metrics Changes - Approximately 92% of net sales are in the U.S., with 60% to 65% of net sales used for the repair and replacement of municipal water infrastructure [11][21] - The company is experiencing resilient end market demand, particularly in the municipal market, while facing uncertainty in the residential construction market [52][33] Company Strategy and Development Direction - The company is focused on enhancing operational excellence, increasing supply chain efficiencies, and developing advanced manufacturing capabilities [14][10] - There is a strong emphasis on adapting to external challenges, including recently enacted tariffs, through pricing actions and supply chain mitigation plans [10][17] - The company aims to capture benefits from investments needed to address aging North American water infrastructure [32][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to adapt to external challenges and maintain focus on delivering critical products [10][34] - The company updated its fiscal 2025 outlook, increasing guidance for consolidated net sales while maintaining adjusted EBITDA guidance [30][31] - Management highlighted the importance of monitoring customer order patterns closely due to uncertainties in the market [19][52] Other Important Information - The company has a strong balance sheet with a net debt leverage ratio below one and no debt maturities until June 2029 [29] - Free cash flow expectations are maintained at over 80% of adjusted net income for 2025 [31] Q&A Session Summary Question: Was there any pre-buy observed due to tariffs? - Management indicated that there were no significant signs of pre-buying, but they are closely analyzing order patterns [40][41] Question: Is the new foundry fully operational? - The new foundry is fully operational, and the old foundry is no longer producing products [42] Question: What is the expected gross margin for the next quarter? - Management expects improvements in gross margin throughout the back half of the year, with an implied range of about 37% [74][75] Question: How much of the business is tied to new lot development versus repair and replacement? - Approximately 60% to 65% of revenue is associated with repair and replacement, while residential construction accounts for about 20% to 25% [86]