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Carpenter (CRS) Up 40.4% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·3 min read

It has been about a month since the last earnings report for Carpenter Technology (CRS). Shares have added about 40.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Carpenter due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Carpenter Technology Reports Q1 Loss, Revenues Down Y/Y

Carpenter Technology reported adjusted loss per share of 58 cents in first-quarter fiscal 2021 (ended Sep 30, 2020) wider than the Zacks Consensus Estimate of a loss of 56 cents. Lower volume due to COVID-19 induced challenging conditions in the Aerospace and Defense and Medical end-use markets led to the dismal results. The company had reported adjusted earnings per share of 85 cents in the year-ago quarter.

Including one-time items, the company reported loss per share of 98 cents against the year-ago quarter’s earnings per share of 85 cents.

Net sales plunged 40% year over year to $353 million in the reported quarter. Volumes were down 29% on a year-over-year basis.

Operational Results

Cost of goods sold in the fiscal first quarter 2021 was down 26% year over year to $350 million. Gross profit plunged 97% year over year to $3.5 million. Adjusted operating loss in the reported quarter was $31 million, against the operating income of around $60 million in the prior-year quarter.

The company witnessed year-over-year revenue decline of 48% in the Aerospace and Defense end-use market. Revenues in the Medical end-use market slid 32%. Revenues in the energy, distribution and transportation end-use markets plunged 35%, 31% and 26%, respectively. However, revenues from the Industrial and consumer end market increased 5%.

Segment Performance

The SAO segment reported sales of $301 million, reflecting a year-over-year decline of 39%. The segment sold 44,348 pounds, 29% lower than the prior-year quarter. The segment reported an operating loss of $18.6 million against an operating profit of $81 million in the prior-year quarter.

The Performance Engineered Products’ net sales fell 44% year over year to $62 million in the fiscal first quarter. The segment sold 1,466 pounds, 55% lower than the year-ago quarter figure. The segment reported operating loss of $3.6 million in the quarter under review compared with operating loss of $2 million in the prior-year quarter.

Financials

The company exited first-quarter fiscal 2021 with cash and cash equivalents of $219 million compared with the $193 million at fiscal 2020 end. Long-term debt was $694 million at the end of the reported quarter compared with $551 million as of fiscal 2020 end. Cash flow from operating activities were $88 million in first-quarter fiscal 2021 compared with the prior-year quarter’s $0.7 million. Free cash flow in the quarter was $62.6 million against an outflow of $56.4 million in year-ago quarter. Carpenter Technology has completed the divestiture of its Amega West oil and gas business in the quarter, which contributed $17.6 million to the quarter’s cash flow.

Outlook

The company anticipates headwinds from COVID-19 to continue to impact demand levels across its key end-use markets in the second quarter as well.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.


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