Carpenter Technology Surges 48% YTD: What's Driving The Rally?

Shares of Carpenter Technology Corporation (NYSE:CRS) have rallied 47.7% year to date, aided by its forecast-toppings earnings and revenue performance in fourth-quarter fiscal 2019 (ended Jun 30, 2019). This momentum is likely to continue on the back of its efforts to strengthen customer relationships, continued execution of commercial strategy and acquisitions.

Carpenter Technology has a market cap of roughly $2.45 billion. For the last three months, its average volume of shares traded has been approximately 316K.

Notably, the stock’s 47.7% year-to-date rally has outperformed the industry’s growth 13%.

Carpenter Technology carries a Zacks Rank #2 (Buy) and has a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum. The company's score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. In fact, our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold), make solid investment choices.

Let’s delve deeper and analyze the reasons behind the company’s impressive price performance and find out if there is room for further appreciation:

Stellar Results in Q4: Carpenter Technology delivered adjusted earnings of $1.00 per share in the fiscal fourth quarter, surpassing the Zacks Consensus Estimate of 94 cents. The company generated revenues of $641 million, which also comfortably beat the Zacks Consensus Estimate of $628 million. Both earnings and revenues improved year over year. Strong operational performance and healthy demand across key end-use markets led to the improvement in quarterly results.

Healthy Growth Projections: The Zacks Consensus Estimate for earnings per share is currently pegged at $3.91 for fiscal 2020, indicating year-over-year growth of 13.01%. For fiscal 2021, the Zacks Consensus Estimate for earnings is pegged at $4.62, calling for year-over-year growth of 18.16%.

Growth Drivers in Place

Carpenter Technology remains focused on continued execution of its commercial strategy. The company continues to gain share across end-use markets by strengthening customer relationships. Through the ongoing implementation of the Carpenter Operating Model, the company has unlocked incremental capacity via efficiency and productivity improvements.

The company continues to invest in targeted growth areas such as additive manufacturing and soft magnetics. The investment in the soft magnetics portfolio remains on track with $100- million investment in precision strip hot-rolling mill. The LPW acquisition will strengthen Carpenter Technology’s hold as a dominant Additive Manufacturing Solutions Provider. The company has built its additive portfolio with the acquisitions of CalRam and Puris. Notably, with the Puris buyout, the company also marked its entry in the promising titanium powder market. Carpenter Technology launched the Carpenter additive business unit, which offers its complete spectrum of products, services and capabilities to meet the growing additive market needs.

Within aerospace, the company is witnessing continued strength in engine and fastener demand. The underlying aerospace market remains robust on large backlog of plane orders and significant growth projected in air travel miles, especially in developing economies. The Medical end-use market is also poised to perform well on solid demand for titanium and cobalt solution, planned expansion at Dynamet, and positive underlying trends in the orthopedic and cardiology markets.

Carpenter Technology Corporation Price and Consensus

Other Stocks to Consider

A few other top-ranked stocks in the basic materials space are Kinross Gold Corporation (NYSE:KGC) , Agnico Eagle Mines Limited (NYSE:AEM) and Arconic Inc (NYSE:ARNC) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinross has an impressive expected earnings growth rate of 160% for 2019. The company’s shares have surged 79.7% over the past year.

Agnico Eagle has an outstanding projected earnings growth rate of 157.1% for the current year. The company’s shares have rallied 69.5% in a year’s time.

Arconic has an estimated earnings growth rate of 50% for the ongoing year. Its shares have appreciated 21.3% in the past year.

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