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Carpenter Beats by a Penny

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Specialty alloy maker Carpenter Technology Corp. (CRS - Free Report) reported earnings of 62 cents per share for second-quarter fiscal 2013 (ended Dec 31, 2012), exceeding earnings of 52 cents a share recorded a year ago. That also beat the Zacks Consensus Estimate by a penny.

Profit surged roughly 40% year over year to $33 million. The bottom line was boosted by higher demand for premium and ultra-premium products and the contributions of the Latrobe Specialty Steel unit, which the company bought in Feb 2012.

Carpenter Technology, a major player in the specialty steel industry along with Allegheny Technologies Inc. (ATI - Free Report) and RTI International , raked in net sales of $533.5 million in the quarter, up 24% year over year. However, it missed the Zacks Consensus Estimate of $549 million. Barring surcharge revenues, sales cruised 30% to $430.7 million.

Sales were boosted by solid gains across the aerospace and defense and energy markets. However, the prevailing economic uncertainty hurt the demand for the company’s low value product lines in the second quarter.

By segment, revenues (excluding surcharge) from the Specialty Alloy Operations (SAO) unit rose 7% year over year to $277.1 million led by gains in premium and ultra-premium products. Performance Engineered Products (PEP) segment revenues climbed 13% to $91.7 million on the back of the addition of Specialty Steel Supply (SSS) energy distribution business.

The Latrobe segment contributed sales of $101.4 million in the reported quarter.  The unit includes the Latrobe Specialty Steel Distribution (LSSD) and Mexican distribution businesses that are planned for divestiture.

By market, revenues from aerospace and defense surged 30% to $250.3 million on the back of strong demand for engine materials and higher airplane build rates. Energy sales soared 30% to $79.5 million driven by higher demand for material used in oil and gas applications.

Revenues from the medical market, however, dipped 16% to $26.6 million on weak demand for medical materials. Transportation sales edged up 1% to $31.8 million. The company recently entered into a collaboration agreement with U.S. Steel (X - Free Report) to develop lighter high-strength steel for automotive applications. The deal underscores strong opportunities in the transportation market.

Carpenter ended the quarter with cash and cash equivalents of $63.1 million, down 80% year over year. Total long-term debt was $406 million, essentially flat year over year.  

The company sees a 20%-30% year-over-year rise in operating income for fiscal 2013. Its continued investment across the aerospace and energy markets is expected to drive results over the next several years.

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

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