Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

CRS's Future Looks Bright: Analyst Forecasts Steady Earnings Growth And Margin Improvements For FY27

Published 13/09/2023, 20:23
© Reuters.  CRS's Future Looks Bright: Analyst Forecasts Steady Earnings Growth And Margin Improvements For FY27
BA
-
GE
-
RTX
-
SPR
-
CRS
-
EADSY
-

Benzinga - by Nabaparna Bhattacharya, Benzinga Editor.

Benchmark analyst Josh Sullivan reiterated a Buy rating on Carpenter Technology Corporation (NYSE: CRS), raising the price target to $100 from $65.

Airline demand for aircraft and engines is robust. Still, the fragility of the aerospace supply chain is causing significant disruptions, as Boeing Company (NYSE: BA), RTX Corporation (NYSE: RTX), Spirit Aerosystems Holdings, Inc. (NYSE: SPR), General Electric Company (NYSE: GE), Airbus SE (OTC: EADSY), etc., have recently experienced.

However, the analyst notes that CRS is leveraging an attractive layer within the aerospace supply chain that offers broad cycle exposure but limited platform-specific risk.

CRS is a prime example of a Golden Goose Zone requiring limited capex, broad platform exposure, and pricing power.

Further, given the pervasive use of nickel alloys, CRS is relatively agnostic to the disruptions Boeing and Airbus have faced or design/manufacturing issues RTX and GE have faced.

Sullivan adds that CRS alloys are in demand across all platforms and aftermarkets, therefore, if individual programs face delays, demand for alloys offers flexibility.

Lastly, CRS has pricing power, with backlogs now closed out beyond 12 months, mentions the analyst.

Net, the analyst believes CRS offers compelling exposure to an attractive aerospace cycle while mitigating platform-specific risk, FY27 guidance looks conservative, and valuation is poised to re-rate with margin improvements and steady earnings growth.

CRS's spring investor day highlighted a four-year 40%+ CAGR for operating income and 80% FCF conversion in FY27 (~$250 million, ~$5/share, ~8% FCF yield).

With EBITDA margins working towards 20%, double-digit top-line growth, and steady, durable earnings growth ahead, Sullivan believes CRS is beginning to re-rate from upper-teens P/E to low 20's.

For FY24, the analyst raised EPS estimates to $3.71 from $3.21; revenue estimates increased to $3.110 billion from $2.985 billion.

For FY25, Sullivan increased the EPS forecast to $4.86 from $4.24; revenue estimate was lowered to $3.413 billion from $3.497 billion.

Price Action: CRS shares are trading higher by 6.89% to $68.70 on the last check Wednesday.

Latest Ratings for CRS

DateFirmActionFromTo
Feb 2022JP MorganUpgradesNeutralOverweight
Jun 2021JP MorganInitiates Coverage OnNeutral
Aug 2020Cowen & Co.DowngradesOutperformMarket Perform
View More Analyst Ratings for CRS

View the Latest Analyst Ratings

© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Read the original article on Benzinga

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.