On Monday, TD Cowen has increased the price target for Carpenter Technology (NYSE: NYSE:CRS) shares, a company recognized for its role in aerospace original equipment (OE) manufacturing, from $116 to $125, while maintaining a Buy rating on the stock.
The firm's analyst highlighted Carpenter Technology's record-high backlog, which has surpassed $2.2 billion, and robust pricing power as key drivers for potential earnings per share (EPS) growth in the upcoming years.
The analyst noted that Carpenter Technology appears undervalued when compared to its aerospace peers based on forward EBITDA estimates for fiscal years 2024 and 2025.
This valuation comes despite the aerospace industry facing lower build rates for the 737Max and 787 aircraft. The company's extended lead times, which are currently greater than 65 weeks, and its strong backlog are seen as positive indicators for sustained EPS growth.
The firm projects that Carpenter Technology's EPS for fiscal year 2025, ending in June, could exceed $6.00, which is slightly above the consensus estimate of $5.94. This expectation is based on the assumption of rising aerospace OE production and higher pricing, without relying on overly optimistic predictions.
The analyst also pointed out that there are few remaining aerospace OE value investment opportunities, making Carpenter Technology's stock particularly attractive.
During a recent non-deal roadshow (NDR) held from June 5 to June 6, Carpenter Technology's management confirmed that demand, pricing, and lead times have remained strong, even with the reduced production of 737 and 787 aircraft.
The company's position as an upstream supplier in the aerospace OE market with significant lead times, backlog, and pricing power, coupled with a lower relative valuation compared to a close peer, ATI, suggests an upward revision bias to the fiscal year 2025 Street EPS estimates. The new price target of $125 is based on a 13.1 times multiple of the estimated calendar year 2024 enterprise value to EBITDA.
In other recent news, Carpenter Technology Corporation has reported a historic third quarter in fiscal year 2024, surpassing its own earnings guidance and setting the stage for a record-breaking year.
The company's adjusted operating income reached $90 million, and they have raised their fourth-quarter guidance, expecting operating income to be between $110 million and $115 million. Benchmark analyst has increased the price target for Carpenter Technology shares to $140, maintaining a Buy rating on the stock. This follows a positive assessment of the company's financial outlook and market position.
TD Cowen also showed confidence in Carpenter Technology, raising its price target on the stock to $116. These are the recent developments in Carpenter Technology's financial performance and market position.
Analysts from both Benchmark and TD Cowen anticipate positive future performance due to the company's strong financial health and robust free cash flow. However, these are projections and actual results may vary.
InvestingPro Insights
With Carpenter Technology's (NYSE: CRS) stock receiving a revised price target from TD Cowen, current and prospective investors may find additional insights from InvestingPro valuable. The company's market capitalization stands at $5.17 billion, reflecting its substantial presence in the industry. Investors should note the company's price-to-earnings (P/E) ratio at 39.75, which suggests a premium valuation compared to the market, although adjusted figures for the last twelve months as of Q3 2024 indicate a lower P/E ratio of 28.45.
One of the InvestingPro Tips highlights that Carpenter Technology is expected to be profitable this year, which aligns with the positive outlook from analysts. Furthermore, with a significant backlog and strong pricing power, the company's robust revenue growth of 15.43% over the last twelve months as of Q3 2024 underpins this optimism. Additionally, the impressive 53.79% price total return over the last three months and 107.12% over the past year underscore the company's strong performance in the market.
Investors looking for further analysis will find additional InvestingPro Tips on https://www.investing.com/pro/CRS. As an incentive, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to a wealth of financial data and expert insights. With 10 additional tips available on InvestingPro, investors can gain a more comprehensive understanding of the investment potential of Carpenter Technology.
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