On Thursday, TD Cowen showed confidence in Carpenter Technology (NYSE:CRS), as the firm raised its price target on the stock to $116 from the previous $90 while retaining a Buy rating. The adjustment comes amid a positive outlook on the company's financial performance and market position.
Carpenter Technology, known for its cyclical original equipment (OE) manufacturing, is recognized for its affordability, pricing power, and opportunities for productivity improvements. The company's extended lead times have also been noted as a strength, particularly as it has not experienced a decline in demand despite reduced production rates of Max/787 aircraft.
The firm's analysts have increased their forecast for Carpenter Technology's fiscal year 2025 earnings per share (EPS) by 20%, a figure that surpasses current consensus estimates on Wall Street. This significant revision is expected to prompt similar changes in the broader market's expectations.
The new price target of $116 is based on an 11 times multiple of the company's earnings before interest, taxes, depreciation, and amortization (EBITDA), which is slightly lower than the multiple assigned to its peer, Allegheny Technologies Incorporated (NYSE:ATI). Despite this conservative valuation, there is anticipation that Carpenter Technology's stock could exceed expectations in the near term due to the anticipated revisions to fiscal year 2025 estimates.
Carpenter Technology's primary customer, Howmet Aerospace (HWM (BMV:HWM)), is currently trading at a multiple of 17 times EBITDA, highlighting a potential for Carpenter Technology to reach or even surpass its peer's valuation in the market. The price target increase reflects optimism about the company's future performance and its ability to capitalize on current market opportunities.
InvestingPro Insights
As Carpenter Technology (NYSE:CRS) garners a favorable outlook from TD Cowen with an increased price target, real-time data from InvestingPro provides additional context for investors considering the stock. The company's market capitalization stands at a robust $4.91 billion, with a high P/E ratio of 37.63, suggesting investor confidence in its earnings potential. The forward-looking perspective is further bolstered by an expected net income growth this year, as per one of the InvestingPro Tips, indicating a positive trajectory for the company's profitability.
Investors should note that Carpenter Technology's recent performance has been impressive, with a significant return over the last week of 20.28% and an even more remarkable one-year price total return of 83.22%. Moreover, the company's liquid assets surpass its short-term obligations, providing financial stability and the ability to maintain dividend payments, which it has done for 54 consecutive years. These metrics underscore the company's solid financial foundation and potential for continued growth.
For those seeking more in-depth analysis, InvestingPro offers additional tips on Carpenter Technology, which can be accessed through their platform. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover even more insights to inform your investment decisions.
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