Carpenter Technology CorporationCRS

Morningstar Rating

Stock Research and Analysis

by Min Ye

Carpenter Technology is a high-quality specialty metals producer operating in a cyclical business. Despite near-term slowdown in aerospace and oil and gas drilling activities, we think Carpenter is positioned to take advantage of the next aerospace up-cycle due to its unique product profile and a shift toward more specialty metal usage in aerospace. Read more

Bulls Say

Over the next decade, the secular growth in higher aerospace specialty metal demand benefits Carpenter.

The highly engineered nature of the company's products and exacting specifications of its customers create high switching costs and allow Carpenter to charge premium prices for many of its goods.

Carpenter's international sales have been expanding rapidly and now account for 25% of total revenue. International markets will continue to present growth opportunity as developing countries establish an industrial base.

Because of the specificity of its products, Carpenter can generally pass on raw-material price fluctuations to end customers. Read more

Bears Say

Carpenter still generates a good portion of its revenue (10%) from domestic automotive producers (primarily Detroit's Big Three). Such sales are less profitable and have less growth potential.

High customer switching costs also make it hard for Carpenter to gain business from competitors.

Some of Carpenter's customers have been moving production offshore and sourcing products from overseas.

Competitors becoming more vertically integrated could potentially threaten Carpenter's business. Carpenter faces a need to consolidate its bargaining power over customers. Read more

Strategy

Carpenter's strategy is to expand its nickel-based alloy and titanium business, which primarily serves the aerospace and energy exploration industries. The company sold its noncore ceramic business in 2008 to focus resources on its specialty metal business. Read more

Management

Gregory A. Pratt assumed the chairman and interim CEO position in October 2009, replacing previous CEO Anne L. Stevens. Stevens, who served as CEO between 2006 and 2009, was a top executive at Ford F before joining Carpenter. Stevens had an operational background and focused on implementing Lean Six Sigma at Carpenter during her tenure. Read more

Profile

Carpenter Technology is a leading U.S. producer of nickel-, cobalt-, titanium-, and chromium-based alloys and specialty metals. Its metal products are used in applications that require stress tolerance and heat and corrosion resistance. Read more

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