Carpenter Technology Corporation (CRS, Financial) posted its financial results for the third quarter of fiscal year 2025, demonstrating robust operational performance. The company reported a revenue of $727 million for the quarter, slightly below the market consensus of $729.35 million. Despite the revenue miss, Carpenter Technology achieved a record operating income of $137.8 million, surpassing its own guidance.
A notable highlight from the earnings report was the Special Alloys Operations (SAO) segment, which showed remarkable growth in profitability. The adjusted operating margin for the SAO segment expanded to 29.1% from 21.4% in the same quarter last year. This marks the thirteenth consecutive quarter of margin improvement for the segment. Additionally, the SAO segment's operating income reached $151.4 million, exceeding the company's expectations for the quarter.
Overall, the performance in the third quarter underscores Carpenter Technology's solid operational strategies and its ability to enhance profitability even amid revenue challenges. The company's focus on improving operational efficiencies continues to yield positive results, positioning it strongly for future growth.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 5 analysts, the average target price for Carpenter Technology Corp (CRS, Financial) is $229.00 with a high estimate of $300.00 and a low estimate of $150.00. The average target implies an upside of 20.07% from the current price of $190.73. More detailed estimate data can be found on the Carpenter Technology Corp (CRS) Forecast page.
Based on the consensus recommendation from 8 brokerage firms, Carpenter Technology Corp's (CRS, Financial) average brokerage recommendation is currently 2.0, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Carpenter Technology Corp (CRS, Financial) in one year is $74.74, suggesting a downside of 60.81% from the current price of $190.73. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Carpenter Technology Corp (CRS) Summary page.
CRS Key Business Developments
Release Date: January 30, 2025
- Operating Income: $119 million, a 70% increase over the second quarter of fiscal year 2024.
- SAO Segment Adjusted Operating Margin: 28.3%, up from 20% a year ago.
- Adjusted Free Cash Flow: $38.6 million for the quarter.
- Sales Increase: 13% year-over-year, with a 5% sequential decrease.
- Gross Profit: $177.5 million, up 45% from the same quarter last year.
- SG&A Expenses: $58.6 million, including $23.6 million of corporate costs.
- Effective Tax Rate: 20% for the current quarter.
- Earnings Per Diluted Share: $1.66 for the quarter.
- SAO Segment Net Sales: $479.6 million, up 15% year-over-year.
- PEP Segment Net Sales: $86.2 million, down 2% year-over-year.
- Cash from Operating Activities: $67.9 million for the quarter.
- Capital Expenditures: Just over $29 million for the quarter.
- Share Repurchase: $8.2 million of shares repurchased in the quarter.
- Total Liquidity: $511 million, including $162.1 million of cash.
- Fiscal Year 2025 Operating Income Guidance: Raised to $500 million to $520 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Carpenter Technology Corp (CRS, Financial) reported a record second quarter with $119 million in operating income, a 70% increase over the previous year.
- The SAO segment achieved an adjusted operating margin of 28.3%, up from 20% a year ago, due to productivity improvements and product mix optimization.
- The company generated $38.6 million in adjusted free cash flow and continued to return cash to shareholders through its repurchase program.
- Carpenter Technology Corp (CRS) raised its full fiscal year 2025 operating income guidance to a range of $500 million to $520 million.
- The Aerospace and Defense market, which accounts for 60% of net sales, continues to show strong demand, particularly in MRO and defense applications.
Negative Points
- Sequential sales decreased by 5% due to customer year-end shutdowns and reduced operations during holidays.
- The PEP segment saw a 7% sequential decline in net sales, with order deferrals impacting the additive business.
- The company experienced a slight decrease in orders this quarter, particularly from customers closely tied to Boeing.
- Lead times for some products remain extended, although slight improvements have been made in certain areas.
- The Medical market is experiencing some destocking, although long-term demand remains positive.
