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Carpenter Technology (CRS) Reports Q1 Loss, Shares Down

Zacks Equity Research
·4 min read

Carpenter Technology Corporation’s CRS share prices have dropped 4% since it 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.

Carpenter Technology Corporation Price, Consensus and EPS Surprise

Carpenter Technology Corporation Price, Consensus and EPS Surprise
Carpenter Technology Corporation Price, Consensus and EPS Surprise

Carpenter Technology Corporation price-consensus-eps-surprise-chart | Carpenter Technology Corporation Quote

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.

Price Performance

Carpenter Technology’s shares have plunged 64.8% year to date compared with the industry's decline of 57.3%.

Zacks Rank & Key Picks

Carpenter Technology currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Agnico Eagle Mines Limited AEM, Barrick Gold Corporation GOLD and Newmont Corporation NEM. While Agnico Eagle Mines and Barrick Gold sport a Zacks Rank #1 (Strong Buy), Newmont carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle Mines has an expected earnings growth rate of 102% for the current year. The company’s shares have surged 31% year to date.

Barrick Gold has a projected earnings growth rate of 99% for the current year. The company’s shares have gained 46% year to date.

Newmont has an estimated earnings growth rate of 91% for the ongoing year. Its shares have appreciated 42% so far this year.

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