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On Tuesday, KeyBanc reiterated its Sector Weight rating on shares of Carpenter Technology (NYSE:CRS), which currently trades at $235.71, following the company’s third fiscal quarter of 2025 results and subsequent discussions with management. The firm adjusted its fiscal year 2025 and 2026 estimates upward, citing a stronger pricing and product mix baseline, coupled with increased other income. According to InvestingPro data, four analysts have recently revised their earnings estimates upward for the upcoming period, with price targets ranging from $230 to $300.
Carpenter Technology, which specializes in the production and distribution of premium alloys, has experienced robust demand for original equipment (OE) and maintenance, repair, and operations (MRO) jet engine components. The company’s strong market position is reflected in its impressive financial metrics, with revenue reaching $2.92 billion in the last twelve months and a healthy gross profit margin of 25.5%. KeyBanc’s analysis suggests that Carpenter Technology’s existing backlog, characterized by pricing and mix strength, is anticipated to deliver resilient financial performance throughout the fiscal year 2025. However, the firm notes that growth comparisons for fiscal year 2026 may present challenges due to the accelerated growth witnessed in the previous two fiscal years.
In KeyBanc’s view, Carpenter Technology’s valuation appears to be stretched when compared to historical levels. This assessment takes into account the recent positive trends in pricing and mix that have contributed to the expansion of the company’s return on invested capital (ROIC). Additionally, the valuation reflects potential expectations of a takeover premium, a sentiment that has been influenced by recent mergers and acquisitions activity within the sector, as seen with companies like Haynes International (NASDAQ:HAYN) and Universal Stainless & Alloy Products (USAP).
The firm’s commentary underscores the importance of the ongoing strength in the aerospace sector, particularly in jet engine demand, which has been a key driver for Carpenter Technology’s business. Despite the optimistic outlook on the company’s operational performance, KeyBanc’s Sector Weight rating indicates a neutral stance on the stock, suggesting that the current share price may already reflect the anticipated positive developments. InvestingPro reveals additional insights about CRS, with over a dozen more ProTips available covering the company’s financial health, momentum, and valuation metrics in the comprehensive Pro Research Report.
In other recent news, Carpenter Technology Corporation reported its fiscal third-quarter 2025 earnings, surpassing expectations with an earnings per share (EPS) of $1.88, compared to the anticipated $1.73. However, the company’s revenue slightly missed projections, coming in at $727 million against a forecast of $729.67 million. Despite the minor revenue shortfall, the company raised its fiscal year 2025 operating income guidance to a range of $520 million to $527 million. Looking further ahead, Carpenter Technology projects significant growth, with operating income expected to reach $765 million to $800 million by fiscal year 2027. The company also anticipates generating $1 billion in free cash flow from fiscal year 2025 to 2027. Analyst discussions during the earnings call highlighted a 20% sequential increase in orders and confidence in a rebound in the medical market for the fourth quarter. Additionally, Carpenter Technology’s aerospace sector, which accounts for 60% of its revenue, continues to be a significant growth driver.
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