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Carpenter Technology Corporation Just Missed Earnings And Its EPS Looked Sad - But Analysts Have Updated Their Models

Simply Wall St

Last week, you might have seen that Carpenter Technology Corporation (NYSE:CRS) released its second-quarter result to the market. The early response was not positive, with shares down 7.6% to US$39.74 in the past week. Revenues of US$573m were in line with forecasts, although statutory earnings per share (EPS) came in below expectations at US$0.83, missing estimates by 5.9%. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Carpenter Technology after the latest results.

Check out our latest analysis for Carpenter Technology

NYSE:CRS Past and Future Earnings, February 3rd 2020

Following last week's earnings report, Carpenter Technology's seven analysts are forecasting 2020 revenues to be US$2.39b, approximately in line with the last 12 months. Statutory earnings per share are expected to shrink 9.1% to US$3.38 in the same period. Yet prior to the latest earnings, analysts had been forecasting revenues of US$2.46b and earnings per share (EPS) of US$4.03 in 2020. Analysts seem less optimistic after the recent results, reducing their sales forecasts and making a real cut to earnings per share forecasts.

Analysts made no major changes to their price target of US$49.25, suggesting the downgrades are not expected to have a long-term impact on Carpenter Technology's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Carpenter Technology, with the most bullish analyst valuing it at US$56.00 and the most bearish at US$39.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Carpenter Technology shareholders.

It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Carpenter Technology's past performance and to peers in the same market. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.8% a significant reduction from annual growth of 2.9% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same market are forecast to see their revenue grow 4.6% annually for the foreseeable future. It's pretty clear that Carpenter Technology's revenues are expected to perform substantially worse than the wider market.

The Bottom Line

The biggest concern with the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Carpenter Technology. Unfortunately, analysts also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider market. Even so, earnings per share are more important to the intrinsic value of the business. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Carpenter Technology going out to 2022, and you can see them free on our platform here.

It might also be worth considering whether Carpenter Technology's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.