Bear of the Day: Carpenter Technology (CRS)

Carpenter Technology Corporation (CRS) is a manufacturer and distributor of specialty alloys, including stainless steel and titanium, and various engineered products made from metallic and ceramic materials.

These products are used in planes, cars and trucks, electronic equipment, medical devices, industrial fittings, sporting goods, and oil and gas exploration and processing.

Disappointing Third Quarter Results

On January 31, 2014, CRS reported its quarterly results. Net income came in at $29.5 million or $0.55 per diluted share, down from $33.0 million or $0.62 per diluted share in the same quarter last year.

Net sales for the quarter were $503.5 million, down $16.1 million from the same quarter last year, on 8% higher shipments. According to the management, the decline can be attributed primarily to the continued soft demand in Aerospace and Energy.

Downward Estimates Revisions

Analysts have revised their estimates downwards in the past few weeks. The Zacks Consensus Estimate for the current quarter has gone down from $0.80 per share, 30 days ago to $0.70 per share at present. For full year 2014 too, the estimate has gone down from $4.12 per share to $3.80 per share.

The stock fell back to a Zacks Rank # 5 (Strong Sell) on January 31, 2014, on negative earnings momentum.

The Bottom Line

CRS is currently Zacks Rank # 5 (Strong Sell) stock and it also has a longer-term recommendation of “Underperform”.
Further, Zacks industry rank of 254 out of 265 also indicates more weakness to come in the near term.

Better Plays in the Industry?

As of now, none of the companies in specialty steel industry have been ranked “Buy” or “Strong Buy” by us. In view of the negative industry outlook, investors may like to avoid this space altogether for the time being.