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Carpenter Technology's (CRS) Loss Narrower Than Expected in Q4

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Carpenter Technology Corporation (CRS - Free Report) reported adjusted loss per share of 31 cents in fourth-quarter fiscal 2020 (ended Jun 30, 2020), narrower than the Zacks Consensus Estimate of a loss of 35 cents. The company had reported adjusted earnings per share of $1 in the year-ago quarter. This dismal performance resulted from elevated operational costs, reduced productivity and bleak customer demand due to the coronavirus pandemic.

Including one-time items, the company reported loss per share of $2.46 as against the year-ago quarter’s earnings per share of $1.

Net sales of $437 million for the quarter were down 32% year over year. The top-line figure, however, surpassed the Zacks Consensus Estimate of $380 million. Volumes were down 32% on a year-over-year basis.

Operational Results

Cost of goods sold in the fiscal fourth quarter was down 20.4% year over year to $413 million. Gross profit tanked 80.4% year over year to $24 million. Adjusted operating loss in the reported quarter came in at $18.1 million, as against the operating income of $68 million recorded in the prior-year quarter.

The company witnessed year-over-year revenue decline of 29.6% in the Aerospace and Defense end-use market. Revenues in the Medical end-use market slid 17.6%. Revenues in the energy, distribution and transportation end-use markets plunged 29.3%, 41% and 46.8%, respectively. Revenues from the Industrial and consumer end market also decreased 25.3%.

Carpenter Technology Corporation Price, Consensus and EPS Surprise

Carpenter Technology Corporation Price, Consensus and EPS Surprise

Segment Performance

The SAO segment reported sales of $369 million, reflecting a year-over-year decline of 30.6%. The segment sold 46,124 pounds, 31% lower than the prior-year quarter. Operating profit slumped 94% year over year to $5.3 million.

The Performance Engineered Products’ net sales dipped 39% year over year to $77 million in the fiscal fourth quarter. The segment sold 2,384 pounds, 43% lower than the year-ago quarter figure. The segment reported operating loss of $8.4 million in the fiscal fourth quarter compared with the operating profit of $1.7 million recorded in the prior-year quarter.

Financials

The company exited fiscal 2020 with cash and cash equivalents of $193 million compared with the $27 million recorded at fiscal 2019 end. Long-term debt was $551.8 million at the end of fiscal 2020 compared with $550.6 million as of fiscal 2019 end. Cash provided by operating activities were $231.8 million in fiscal 2020 compared with the prior fiscal’s $232.4 million.

Outlook

Carpenter Technology stated that the COVID-19 pandemic continues to impact global economic conditions and customer demand patterns. Therefore, it expects bleak demand during the first half of fiscal 2021.

The company expects strong long-term outlook for key end-use markets. It is focused on increasing market share across key Aerospace and Defense and Medical platforms and applications, while soft magnetics and additive manufacturing technologies continue to support long-term sustainable growth and creating value for shareholders.

Carpenter Technology has executed targeted cost reductions and portfolio restructurings, which is expected to deliver annual cost savings between $60 million and $70 million. It has further increased its liquidity with a $400-million bond offering. Moreover, the company is focused on aligning its production with customer demand.

Fiscal 2020 Performance

Carpenter Technology reported adjusted earnings per share of $2.21 in fiscal 2020, down from fiscal 2019’s earnings per share of $3.46. In fiscal 2020, net sales came in at $2.18 billion, down 8.4% from the prior fiscal year.

Price Performance

Carpenter Technology’s shares have gained 7.7% over the past three months, outperforming the industry's growth of 5.1%.

Zacks Rank & Key Picks

Carpenter Technology currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Coeur Mining Inc. (CDE - Free Report) , Commercial Metals Company (CMC - Free Report) and The Scotts MiracleGro Company (SMG - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Coeur Mining has an expected earnings growth rate of a whopping 138.7% for the current year. The company’s shares have surged 70% over the past year.

Commercial Metals has a projected earnings growth rate of 15% for the current year. The company’s shares have gained 34% in a year’s time.

Scotts MiracleGro has an estimated earnings growth rate of 44.5% for the ongoing year. Its shares have appreciated 43% in the past year.

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