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Carpenter Technology (CRS) to Retrench 20% of Workforce
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Carpenter Technology Corporation (CRS - Free Report) announced that it is reducing its global workforce by 20%. This move, along with others, will save between $60 million and $70 million annually for the company. The decision has been taken to mitigate the impact of the coronavirus pandemic on the company’s results.
Carpenter Technology expects to incur a charge of $10 million in fourth-quarter fiscal 2020 as a result of the job cuts. However, these layoffs will reduce costs by about $30-$35 million a year. As of the end of fiscal 2019, the company had 5,100 employees.
The COVID-19 pandemic continues to impact global economic conditions and customer-demand patterns. This was indicated by the company’s third-quarter fiscal 2020 (ended Mar 31, 2020) results, wherein adjusted earnings per share of 82 cents per share came in 22% lower than the year-ago quarter. Net sales of $585 million were down 4% year over year. Volumes were down 9% on a year-over-year basis and for the first time in 13 quarters, backlog decreased 7% year over year.
Carpenter Technology has, thus, undertaken several actions to initiate cost savings and preserve liquidity, which include implementing temporary leaves for certain production and maintenance employees across facilities based on the planned production scheduling, implementing a global hiring freeze and deferring annual merit increases for most salaried employees.
The company is also cutting down on capital expenditures for fiscal 2021 by approximately 25-30% from fiscal 2020 and prioritizing capital investments to target the existing and future growth markets. It has also initiated actions to reduce working capital levels, primarily inventory, to align with consumer demand.
The company also recently approved actions to exit the downstream oil and gas (Amega West) business and idle two domestic powder metals production facilities in Rhode Island and West Virginia. These strategic actions were taken to fuel long-term growth in light of the current weakness in the oil and gas sub-market as well as the coronavirus pandemic-induced economic uncertainties. All of these actions are expected to generate $60-$70 million of annual cost savings.
Carpenter Technology’s total liquidity (including cash and available credit facility borrowings) was $317.1 million at the end of the fiscal third quarter. This consisted of $93 million of cash and $224.1 million of available borrowings under the company’s credit facility. Its long-term debt was at $552 million at the end of the fiscal third quarter and debt-to-capital ratio remains a healthy 0.31, in line with the industry. Moreover, the company has no near-term debt maturities or significant pension contributions until fiscal 2022. Carpenter Technology’s times interest earned ratio has improved over the past five years and is currently at 11.2, much higher than the industry’s 5.1. This indicates that the company is in a good position to meet its debt obligations.
Price Performance
Carpenter Technology’s shares have depreciated 36.8% over the past year compared with the industry's decline of 48.6%.
Zacks Rank & Key Picks
Carpenter Technology currently carries a Zacks Rank #5 (Strong Sell).
Barrick Gold has a projected earnings growth rate of 65% for 2020. Shares of the company have rallied nearly 74% over the past year.
B2Gold has projected earnings growth rate of 220% for the ongoing year. The company’s shares have surged around 80% in the past year.
Kinross Gold has an estimated earnings growth rate of 61% for fiscal 2020. The stock has appreciated roughly 80% in a year’s time.
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Carpenter Technology (CRS) to Retrench 20% of Workforce
Carpenter Technology Corporation (CRS - Free Report) announced that it is reducing its global workforce by 20%. This move, along with others, will save between $60 million and $70 million annually for the company. The decision has been taken to mitigate the impact of the coronavirus pandemic on the company’s results.
Carpenter Technology expects to incur a charge of $10 million in fourth-quarter fiscal 2020 as a result of the job cuts. However, these layoffs will reduce costs by about $30-$35 million a year. As of the end of fiscal 2019, the company had 5,100 employees.
The COVID-19 pandemic continues to impact global economic conditions and customer-demand patterns. This was indicated by the company’s third-quarter fiscal 2020 (ended Mar 31, 2020) results, wherein adjusted earnings per share of 82 cents per share came in 22% lower than the year-ago quarter. Net sales of $585 million were down 4% year over year. Volumes were down 9% on a year-over-year basis and for the first time in 13 quarters, backlog decreased 7% year over year.
Carpenter Technology has, thus, undertaken several actions to initiate cost savings and preserve liquidity, which include implementing temporary leaves for certain production and maintenance employees across facilities based on the planned production scheduling, implementing a global hiring freeze and deferring annual merit increases for most salaried employees.
The company is also cutting down on capital expenditures for fiscal 2021 by approximately 25-30% from fiscal 2020 and prioritizing capital investments to target the existing and future growth markets. It has also initiated actions to reduce working capital levels, primarily inventory, to align with consumer demand.
The company also recently approved actions to exit the downstream oil and gas (Amega West) business and idle two domestic powder metals production facilities in Rhode Island and West Virginia. These strategic actions were taken to fuel long-term growth in light of the current weakness in the oil and gas sub-market as well as the coronavirus pandemic-induced economic uncertainties. All of these actions are expected to generate $60-$70 million of annual cost savings.
Carpenter Technology’s total liquidity (including cash and available credit facility borrowings) was $317.1 million at the end of the fiscal third quarter. This consisted of $93 million of cash and $224.1 million of available borrowings under the company’s credit facility. Its long-term debt was at $552 million at the end of the fiscal third quarter and debt-to-capital ratio remains a healthy 0.31, in line with the industry. Moreover, the company has no near-term debt maturities or significant pension contributions until fiscal 2022. Carpenter Technology’s times interest earned ratio has improved over the past five years and is currently at 11.2, much higher than the industry’s 5.1. This indicates that the company is in a good position to meet its debt obligations.
Price Performance
Carpenter Technology’s shares have depreciated 36.8% over the past year compared with the industry's decline of 48.6%.
Zacks Rank & Key Picks
Carpenter Technology currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the basic materials space include Barrick Gold Corporation (GOLD - Free Report) , B2Gold Corp. (BTG - Free Report) and Kinross Gold Corporation (KGC - Free Report) . All of these stocks carry a Zacks Rank of #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Barrick Gold has a projected earnings growth rate of 65% for 2020. Shares of the company have rallied nearly 74% over the past year.
B2Gold has projected earnings growth rate of 220% for the ongoing year. The company’s shares have surged around 80% in the past year.
Kinross Gold has an estimated earnings growth rate of 61% for fiscal 2020. The stock has appreciated roughly 80% in a year’s time.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>