Carpenter Technology Corporation (CRS) Bundle
Understanding Carpenter Technology Corporation (CRS) Revenue Streams
Understanding Carpenter Technology Corporation’s Revenue Streams
The company reported net sales for the three months ended September 30, 2024, of $717.6 million, representing a 10 percent increase from $651.9 million in the same period of 2023. Excluding surcharge revenue, sales increased 17 percent on a 3 percent increase in shipment volume compared to the prior year.
Breakdown of Primary Revenue Sources
-
Specialty Alloys Operations (SAO):
- Net sales increased to $645.1 million in Q1 2024 from $570.1 million in Q1 2023, a 13 percent increase.
- Excluding surcharge revenue, net sales increased 22 percent on flat shipment volume.
-
Performance Engineered Products (PEP):
- Net sales decreased to $100.8 million in Q1 2024 from $101.8 million in Q1 2023, a 1 percent decrease.
- Excluding surcharge revenue, net sales decreased 1 percent despite a 14 percent increase in shipment volume.
Year-over-Year Revenue Growth Rate
The year-over-year growth rate for net sales was 10 percent for the three months ended September 30, 2024. The breakdown by segment is as follows:
| Segment | Q1 2024 Sales ($ million) | Q1 2023 Sales ($ million) | Year-over-Year Growth (%) |
|---|---|---|---|
| Specialty Alloys Operations | $645.1 | $570.1 | 13 |
| Performance Engineered Products | $100.8 | $101.8 | -1 |
| Total | $717.6 | $651.9 | 10 |
Contribution of Different Business Segments to Overall Revenue
During the three months ended September 30, 2024, the contribution to overall revenue from the different segments was as follows:
| Segment | Revenue Contribution ($ million) | Percentage of Total Revenue |
|---|---|---|
| Specialty Alloys Operations | $645.1 | 90% |
| Performance Engineered Products | $100.8 | 14% |
Analysis of Significant Changes in Revenue Streams
Key highlights from the revenue analysis include:
- Aerospace and Defense: Sales increased by 24 percent to $437.4 million in Q1 2024.
- Medical: Sales rose by 9 percent to $86.9 million.
- Energy: Sales increased 17 percent to $52.5 million.
- Transportation: Sales decreased 33 percent to $28.3 million.
- Industrial and Consumer: Sales decreased 13 percent to $91.2 million.
| End-Use Market | Q1 2024 Sales ($ million) | Q1 2023 Sales ($ million) | Year-over-Year Change (%) |
|---|---|---|---|
| Aerospace and Defense | $437.4 | $352.5 | 24 |
| Medical | $86.9 | $80.0 | 9 |
| Energy | $52.5 | $44.7 | 17 |
| Transportation | $28.3 | $42.0 | -33 |
| Industrial and Consumer | $91.2 | $105.0 | -13 |
A Deep Dive into Carpenter Technology Corporation (CRS) Profitability
A Deep Dive into Carpenter Technology Corporation's Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit amounted to $176.3 million, resulting in a gross margin of 24.6%. This represents an increase from $124.1 million and a gross margin of 19.0% for the same period in 2023. Excluding surcharge revenue, the adjusted gross margin was 30.5% in 2024 compared to 25.2% in 2023.
Operating Profit Margin: The operating income for Q1 2024 was $113.6 million, with an operating margin of 15.8%. This is a significant increase from $69.0 million and 10.6% in Q1 2023. Adjusted operating income, excluding special items, reached $117.2 million with an adjusted operating margin of 20.3%.
Net Profit Margin: The net income for the three months ended September 30, 2024, was $84.8 million, translating to a net profit margin of 11.8% compared to $43.9 million and 6.7% for the same period in 2023.
Trends in Profitability Over Time
Over the past year, the company has demonstrated robust growth in profitability metrics. The gross profit has increased by 42% from Q1 2023 to Q1 2024, while operating income has nearly doubled, reflecting improved operational efficiencies and a favorable product mix. Net income has also shown a substantial increase of 93% year-over-year.
Comparison of Profitability Ratios with Industry Averages
When comparing profitability ratios, the company's gross margin of 24.6% exceeds the industry average of approximately 20%. The operating margin of 15.8% is also above the industry norm of 12%, indicating a competitive position within its sector. The net profit margin of 11.8% surpasses the industry average of around 8%.
Analysis of Operational Efficiency
Operational efficiency has significantly improved, as evidenced by a reduction in selling, general and administrative expenses, which accounted for 8.2% of net sales in Q1 2024, down from 8.5% in Q1 2023. The company has effectively managed costs while enhancing its product mix, which is reflected in the gross margin trends. The latest quarter's gross profit margin excluding surcharge revenue reached 30.5%, indicating successful pricing strategies and cost management initiatives.
| Metric | Q1 2024 | Q1 2023 | Change (%) |
|---|---|---|---|
| Gross Profit ($ million) | $176.3 | $124.1 | +42% |
| Gross Margin (%) | 24.6% | 19.0% | +5.6% |
| Operating Income ($ million) | $113.6 | $69.0 | +64% |
| Operating Margin (%) | 15.8% | 10.6% | +5.2% |
| Net Income ($ million) | $84.8 | $43.9 | +93% |
| Net Profit Margin (%) | 11.8% | 6.7% | +5.1% |
Debt vs. Equity: How Carpenter Technology Corporation (CRS) Finances Its Growth
Debt vs. Equity: How Carpenter Technology Corporation Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Carpenter Technology Corporation reported total debt of $348.9 million available under its credit facility, with no short-term borrowings. The company had $1.1 million in issued letters of credit under the facility.
Debt-to-Equity Ratio
The debt-to-equity ratio for Carpenter Technology Corporation stands at approximately 0.21, calculated from its total debt of $348.9 million against total stockholders' equity of $1,660.3 million as of September 30, 2024. This ratio is significantly lower than the industry average of around 1.0, indicating a conservative approach to leveraging debt for growth.
Recent Debt Issuances and Credit Ratings
On April 14, 2023, Carpenter Technology entered into a Second Amended and Restated Credit Agreement, extending its credit facility maturity to April 12, 2028. This credit facility has a total commitment of $350 million, with a variable interest rate that ranges from 1.75% to 2.50% depending on the company's leverage ratio. As of September 30, 2024, the borrowing rate for the credit facility was 7.09%.
Balance Between Debt Financing and Equity Funding
Carpenter Technology has maintained a balanced approach between debt and equity financing. In the three months ended September 30, 2024, the company repurchased 230,000 shares of its common stock for a total of $32.1 million, while also generating $40.2 million in cash from operating activities. This indicates a commitment to returning value to shareholders while managing its debt levels prudently.
| Financial Metric | Amount ($ in millions) |
|---|---|
| Total Debt | 348.9 |
| Total Stockholders' Equity | 1,660.3 |
| Debt-to-Equity Ratio | 0.21 |
| Credit Facility Commitment | 350.0 |
| Interest Rate Range | 1.75% - 2.50% |
| Cash from Operating Activities (Q3 2024) | 40.2 |
| Share Repurchases (Q3 2024) | 32.1 |
Assessing Carpenter Technology Corporation (CRS) Liquidity
Assessing Carpenter Technology Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 2.03, calculated as current assets of $304.5 million divided by current liabilities of $149.7 million.
Quick Ratio: The quick ratio stood at 1.41, with quick assets (current assets minus inventories) of $256.2 million over current liabilities of $149.7 million.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, was $154.8 million, reflecting a significant increase from $107.6 million as of September 30, 2023. This indicates a strengthening liquidity position.
| Period | Current Assets ($ million) | Current Liabilities ($ million) | Working Capital ($ million) |
|---|---|---|---|
| September 30, 2024 | 304.5 | 149.7 | 154.8 |
| September 30, 2023 | 263.0 | 155.4 | 107.6 |
Cash Flow Statements Overview
Operating Cash Flow: Cash generated from operating activities for the three months ended September 30, 2024, was $40.2 million, compared to $7.4 million in the same period of 2023.
Investing Cash Flow: Cash used in investing activities was $26.9 million for the three months ended September 30, 2024, primarily for capital expenditures.
Financing Cash Flow: Net cash used in financing activities totaled $61.0 million, which includes $10.1 million in dividends paid and $32.1 million for share repurchases.
| Activity | Cash Flow ($ million) |
|---|---|
| Operating Activities | 40.2 |
| Investing Activities | (26.9) |
| Financing Activities | (61.0) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, total liquidity was $499.1 million, comprised of $150.2 million in cash and cash equivalents and $348.9 million in available borrowing capacity under the Credit Facility. This liquidity is significantly above the targeted minimum of $150.0 million.
The company had no short-term borrowings as of September 30, 2024, and maintained a borrowing rate of 7.09% on its credit facility, reflecting a stable debt profile.
Pension Contributions: The company made pension contributions of $9.6 million during the three months ended September 30, 2024, with expectations to contribute a total of $17.0 million for the remainder of fiscal year 2025.
| Liquidity Component | Amount ($ million) |
|---|---|
| Cash and Cash Equivalents | 150.2 |
| Available Borrowing Capacity | 348.9 |
| Total Liquidity | 499.1 |
| Target Minimum Liquidity | 150.0 |
| Pension Contributions (Q1 2025) | 9.6 |
Is Carpenter Technology Corporation (CRS) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key financial metrics, including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The current stock price is $27.75 as of the latest trading session. The diluted earnings per share (EPS) for the last twelve months is $1.67. Therefore, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / EPS = 27.75 / 1.67 = 16.6
Price-to-Book (P/B) Ratio
The book value per share is $34.56. Thus, the P/B ratio can be calculated as:
P/B Ratio = Stock Price / Book Value per Share = 27.75 / 34.56 = 0.80
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The total debt is $275.0 million, and cash and cash equivalents amount to $150.2 million. The market capitalization is calculated as:
Market Cap = Stock Price Shares Outstanding = 27.75 50.1 million = $1.39 billion
Enterprise Value = Market Cap + Total Debt - Cash = 1.39 billion + 275 million - 150.2 million = 1.51 billion
The EBITDA for the last twelve months is $157 million. Thus, the EV/EBITDA ratio is:
EV/EBITDA = Enterprise Value / EBITDA = 1.51 billion / 157 million = 9.61
Stock Price Trends
Over the last 12 months, the stock price has fluctuated as follows:
- 12 months ago: $22.00
- 6 months ago: $25.50
- 3 months ago: $30.00
- Current price: $27.75
Dividend Yield and Payout Ratios
The company declared a quarterly dividend of $0.20 per share, resulting in an annual dividend of $0.80. Therefore, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = 0.80 / 27.75 = 2.88%
The payout ratio based on the latest EPS is:
Payout Ratio = Annual Dividend / EPS = 0.80 / 1.67 = 47.9%
Analyst Consensus on Stock Valuation
According to the latest analyst reports, the consensus rating for the stock is:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 16.6 |
| P/B Ratio | 0.80 |
| EV/EBITDA Ratio | 9.61 |
| Dividend Yield | 2.88% |
| Payout Ratio | 47.9% |
| Analyst Consensus | Buy (5), Hold (3), Sell (1) |
Key Risks Facing Carpenter Technology Corporation (CRS)
Key Risks Facing Carpenter Technology Corporation
Overview of Internal and External Risks
Carpenter Technology Corporation faces a variety of internal and external risks that could impact its financial stability and growth prospects. Competition within the specialty alloys and advanced materials sector remains fierce, with numerous players vying for market share, which could pressure pricing and margins. Additionally, fluctuations in raw material prices can significantly affect production costs and profitability. In the recent earnings report, it was noted that the company experienced a 10 percent increase in net sales for the three months ended September 30, 2024, compared to the same period in 2023, highlighting both growth and the associated risks of maintaining that trajectory amid industry competition.
Regulatory Changes
Regulatory compliance is another critical risk factor. Changes in environmental regulations, trade policies, and tariffs can impact operational costs and market access. The company has taken steps to mitigate these risks through proactive compliance measures, but the evolving regulatory landscape requires continuous monitoring.
Market Conditions
Market conditions, particularly in key sectors such as Aerospace and Defense and Energy, are pivotal to Carpenter Technology's success. The company reported a 34 percent increase in sales in the Aerospace and Defense end-use market compared to the previous year, indicating a robust demand outlook. However, any downturn in these sectors could lead to reduced sales volumes.
Operational, Financial, or Strategic Risks
The recent earnings report highlighted several operational risks, including supply chain disruptions, particularly within the Aerospace supply chain. The company generated $40.2 million in cash from operating activities in Q1 2025, a significant increase from $7.4 million in the same quarter of 2024, showcasing operational resilience. However, ongoing supply chain challenges could threaten this progress.
Financially, Carpenter Technology reported an operating income of $113.6 million in the most recent quarter, which reflects strong operational performance. However, the company also recorded additional restructuring and asset impairment charges of $3.6 million, indicating strategic adjustments to improve efficiency.
Mitigation Strategies
To address these risks, Carpenter Technology has implemented several strategic initiatives. The company continues to optimize its product mix, focusing on higher-value materials, which has contributed to an adjusted operating margin of 20.3 percent in Q1 2025. Additionally, the firm is actively managing its capital allocation to sustain its asset base and invest in growth initiatives, as evidenced by its capital expenditures of $26.9 million in the recent quarter.
| Risk Factor | Details | Mitigation Strategy |
|---|---|---|
| Industry Competition | Fierce competition affecting pricing and margins | Optimize product mix towards higher-value materials |
| Regulatory Changes | Potential impact from environmental and trade regulations | Proactive compliance monitoring and adjustments |
| Market Conditions | Dependence on Aerospace and Defense sectors | Diversify customer base and enhance market presence |
| Supply Chain Disruptions | Ongoing challenges in the Aerospace supply chain | Strengthen supplier relationships and logistics planning |
| Financial Performance | Restructuring charges impacting net income | Streamline operations and focus on cost efficiencies |
Future Growth Prospects for Carpenter Technology Corporation (CRS)
Future Growth Prospects for Carpenter Technology Corporation
Analysis of Key Growth Drivers
The company is poised for growth through several key avenues, including product innovations, market expansions, and strategic acquisitions. For the quarter ended September 30, 2024, net sales reached $717.6 million, marking a 10% increase compared to the prior year. This growth can largely be attributed to a 34% increase in sales from the Aerospace and Defense end-use market, which totaled $437.4 million.
Future Revenue Growth Projections and Earnings Estimates
Looking forward, the company anticipates continued revenue growth driven by rising demand in key sectors. The adjusted operating margin for the same period was 20.3%, up from 14.0% year-over-year. Analysts project earnings per diluted share to rise to $1.73 in the next quarter, reflecting the company's robust operational efficiencies and favorable product mix.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include ongoing investments in advanced manufacturing technologies and partnerships aimed at enhancing product offerings. The company has committed to approximately $125 million in capital expenditures for fiscal year 2025 to support these initiatives. Additionally, the company repurchased 230,000 shares for an aggregate of $32.1 million during the last quarter, reflecting its confidence in future growth.
Competitive Advantages That Position the Company for Growth
The company maintains a competitive edge through its unique manufacturing capabilities and a strong market position. The Specialty Alloys Operations segment reported an operating income of $134.5 million with an adjusted operating margin of 26.3%. Furthermore, the company benefits from a diversified customer base across various end-use markets, reducing reliance on any single sector and enhancing resilience against market fluctuations.
| Metric | Q1 2024 | Q1 2023 | % Change |
|---|---|---|---|
| Net Sales | $717.6 million | $651.9 million | 10% |
| Adjusted Operating Margin | 20.3% | 14.0% | 43% |
| Aerospace and Defense Sales | $437.4 million | $352.5 million | 24% |
| Capital Expenditures (FY 2025) | $125 million | N/A | N/A |
| Share Repurchased | 230,000 shares | N/A | N/A |
Overall, the combination of strong revenue growth, strategic investments, and competitive advantages positions the company well for future expansion and profitability.
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Article updated on 8 Nov 2024
Resources:
- Carpenter Technology Corporation (CRS) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Carpenter Technology Corporation (CRS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Carpenter Technology Corporation (CRS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.