IBD Stock Analysis
- Cup base has 72.66 buy point, with possible early entry at 71.30.
Industry Group Ranking
* Not real-time data. All data shown was captured at
3:52PM EST on
Carpenter Technology (CRS) is Tuesday’s IBD Stock Of The Day as the supplier of specialty alloys and engineered products for the aerospace, defense and medical industries raises prices amid strong demand. CRS stock, part of the flagship IBD 50 list of leading growth stocks, is near a buy point.
In fiscal Q1 through September, Philadelphia-based Carpenter grew sales 25% to $651.9 million. Aerospace and defense sales accounted for 53% of revenue and medical sales 14%, with respective growth of 42% and 34% from a year ago. The year-over-year growth excludes surcharges that Carpenter applies to pass along the cost of its raw materials.
Additionally, other segments served include transportation, energy, industrial and consumer.
Exposure To Aerospace Cycle
On Sept. 13, Benchmark analyst Josh Sullivan touted Carpenter’s positioning in what he calls the aerospace supply chain’s ‘Golden Goose Zone.’ Because of Carpenter’s breadth of business, it offers “compelling exposure to an attractive aerospace cycle,” without the risk of sales relying too much on any company or aircraft. Sullivan hiked his price target to 100 from 65, keeping a buy rating.
Meanwhile, adjusted operating margin for the specialty alloys segment widened to 19.4% from 16.8% in the prior quarter and 6.5% a year ago. Plus, early in Q2, the company announced a 7% to 12% price hike on non-contract orders for most of its premium special alloy products.
Record Order Backlog
“Demand for our difficult-to-manufacture products is exceeding industry supply,” CEO Tony Thene said on the Oct. 26 Q1 earnings call.
He highlighted 32% growth in the order backlog vs. a year ago, adding that customer behavior and industry trends bode well for strong demand not just in the near term but in the long term.
“Medical innovations, next generation defense platforms and electrification are examples of areas where customers are partnering with us,” he said. Thene added that those products will help expand margins.
The performance engineered products division saw operating income grow 44% from a year ago to $9.1 million. The improvement was led by its Dynamet Titanium business, whose growth was driven by materials for medical applications, such as dental and orthopedic implants.
MarketSmith Analysis: CRS Stock
However, CRS stock dipped 1% to 67.56 in Tuesday afternoon stock market action. CRS is holding above its 50-day moving average.
The official buy point for CRS stock is 72.66 from a seven-week consolidation, according to a weekly MarketSmith chart.
A move past 71.30 would offer an early entry opportunity.
According to IBD Stock Checkup, CRS stock has a 99 IBD Composite Rating, a single rating combining both fundamental and technical factors. That puts Carpenter in the top 1% of all stocks.
CRS stock is the top-rated stock in the Steel-Specialty Alloys group, which is ranked No. 8 among IBD’s 197 industry groups based on price performance and momentum.
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