What Metallus (MTUS) Said on Its Q3 Earnings Call

Key Points

• Q3 results improved: Sales rose 10% year over year to $337 million, while adjusted EBITDA increased 19% to $34.5 million, supported by aerospace and defense growth, product mix and pricing.
• Defense business is expanding: Aerospace and defense sales grew 41%, and Metallus reached its $250 million annualized sales run-rate target. A new Defense Logistics Agency contract includes an initial order of about $125 million, with shipments expected to begin in Q2 2027.
• Outlook remains positive despite seasonal headwinds: Metallus expects Q4 adjusted EBITDA below Q3 due to shutdown maintenance, but above the prior-year quarter, and reaffirmed its full-year forecast of $100 million to $105 million. Its order book extends into Q2 2027, with pricing increases expected to benefit 2027.

Metallus NYSE: MTUS reported third-quarter 2026 results that included higher sales, profit and adjusted EBITDA, supported by aerospace and defense growth, product mix and pricing actions. The specialty steel producer also said it reached its $250 million annualized aerospace and defense sales run-rate target and secured a Defense Logistics Agency contract with an initial delivery order valued at about $125 million.

Third-quarter net sales totaled $337 million, up $31.3 million, or 10%, from a year earlier. Net income was $23.8 million, or $0.55 per diluted share, while adjusted net income was $14.9 million, or $0.35 per diluted share. Adjusted EBITDA rose 19% sequentially and year over year to $34.5 million.

Chief Executive Officer Mike Williams said the company increased profitability sequentially and year over year for the third consecutive quarter through operational execution, commercial discipline and strategic initiatives. Williams is scheduled to retire as CEO at the end of 2026, with President and Chief Operating Officer Kris Westbrooks set to succeed him in January.

Aerospace and Defense Growth Drives Mix

Aerospace and defense was Metallus’ strongest end market during the quarter. Shipments in the segment reached nearly 22,000 tons, increasing 34% from the prior year and 10% sequentially. Aerospace and defense sales increased 41% year over year, according to Westbrooks.

While aerospace and defense represented 13% of shipment volume during the quarter, it contributed 20% of sales, reflecting the higher value of its products relative to other markets. Westbrooks said the company’s progress in diversifying its end-market portfolio has supported profitability.

In late September, Metallus received a contract from the U.S. Defense Logistics Agency to supply steel for critical defense applications. The agreement includes an initial delivery order of approximately $125 million and a contract ceiling of up to $995 million over a five-year ordering period.

Chief Financial Officer John Zaranec said Metallus is establishing a production and shipment schedule for the initial DLA order. The company expects shipments to begin in the second quarter of 2027 and increase through the remainder of the year. The initial order must be fulfilled within two years of receipt.

During the question-and-answer session, Westbrooks said the company has enough existing capacity to begin and ultimately fulfill the initial DLA order. Metallus is assessing longer-term capital needs, including how to balance defense production with growth opportunities elsewhere in its portfolio. Any new capital investment would take several years to deliver benefits, he said.

The company also commissioned new manufacturing assets supporting critical defense materials in August and secured a $10 million purchase order from a new prime contractor for fully assembled components used in a munitions program. Williams said the company’s recently achieved AS9100 certification and customer wins validate its investments in aerospace and defense.

Operations and Other End Markets

Melt utilization was 76% in the third quarter, excluding a 3-percentage-point impact from electricity curtailments. Westbrooks said weather- and grid-related disruptions increased during the quarter, though underlying operating performance improved. The company completed planned annual melt-shop maintenance in October.

Automotive shipments and sales declined sequentially because of timing but were relatively flat year over year. Westbrooks said automotive demand trends remain steady, supported by a healthy order book, and characterized the market as a core part of Metallus’ portfolio. Automotive represented a high-30% percentage of company sales in the quarter, he said.

Industrial shipments declined 3% both sequentially and year over year. However, the company said spot-price increases implemented during 2026 continued to support base sales per ton and total industrial sales. Industrial distribution inventory remained low, while bookings were elevated compared with the prior year.

Westbrooks told analysts that electricity curtailments reduced melt production by an amount equivalent to about 10,000 tons during the quarter. The company allocated that impact across its order book, which contributed to lower industrial shipments. He said demand remained solid in construction equipment and general machinery.

Energy shipments declined from the second quarter but increased from a year earlier. Metallus cited an approximately 10% year-over-year increase in the U.S. rig count and strong bar and tube demand signals from key customers.

Cash Flow, Capital Spending and Share Repurchases

Metallus generated $6.8 million in operating cash flow during the third quarter. Zaranec said profitability was partly offset by inventory investments supporting the company’s ramp-up and an annual insurance premium payment in July.

Capital expenditures totaled $13.1 million in the quarter, including about $4.9 million for projects primarily funded by the U.S. government. The company continues to expect full-year capital expenditures of approximately $70 million, including roughly $35 million primarily funded by the government.

At Sept. 30, Metallus had $98.6 million in cash and cash equivalents, total liquidity of $389 million and no outstanding borrowings. The company repurchased approximately 190,000 shares for $3.6 million during the quarter, leaving $78.2 million under its existing authorization.

Zaranec said the company has reduced diluted shares outstanding by 26%, or 14.2 million shares, since initiating common-stock repurchases in early 2022 and through convertible note repurchase activity.

Fourth-Quarter and 2027 Outlook

Metallus expects fourth-quarter shipments to decline by a high single-digit percentage from the third quarter because of normal year-end seasonality, though shipments are expected to exceed the prior-year fourth quarter. Bar and tube lead times currently extend into the second quarter of 2027.

The company expects fourth-quarter price and mix to be slightly lower sequentially, primarily because of product mix rather than systemic pricing changes. Metallus announced $60-per-ton price increases for bar and quench-and-temper seamless mechanical tubing in early October for customers not covered by annual pricing agreements. Zaranec said benefits from those increases are expected to ramp through 2027.

Annual shutdown maintenance is expected to reduce fourth-quarter adjusted EBITDA by approximately $10 million to $15 million from the third quarter, reflecting higher shutdown costs, lower fixed-cost leverage and lower melt utilization. Metallus forecast fourth-quarter adjusted EBITDA below the third quarter but above the prior-year period, and reaffirmed expected full-year adjusted EBITDA of $100 million to $105 million.

Westbrooks said market conditions remain favorable, with the order book increasing sequentially and year over year and customer orders extending into the second quarter of 2027. The company expects to target about 70% of long-product orders under annual contracts for 2027 and said it was about one-third through those negotiations. Metallus expects pricing expansion versus prior-year annual contracts, though management said price realization could extend into the first and early second quarters.

Regarding the leadership transition, Westbrooks said the succession process is intended to provide continuity in strategy. He said the company’s immediate focus will be delivering on its order book and the DLA award while pursuing profitable growth.

About Metallus (NYSE:MTUS)

Metallus, Inc is a specialty metals manufacturer based in Canton, Ohio. The company produces alloy steel and other engineered materials for applications that require strength, durability, and precision. Its products are used in demanding industrial and transportation applications.

The company's offerings include special bar quality steel, seamless mechanical tubing, and precision-engineered steel components. Metallus serves customers in markets such as automotive, aerospace and defense, energy, industrial equipment, and other manufacturing sectors.

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