Shares in Carpenter Technology (CRS 0.29%) rose 18.9% in the week ending Friday morning, according to data provided by S&P Global Market Intelligence. There's no mystery as to why. The company's stellar third-quarter 2024 earnings served notice that the aerospace supplier is ahead of its medium-term aims.
Carpenter Technology's third-quarter earnings
CEO Tony Thene made investors' and my life a lot easier by summarizing the key takeaways from the company's earnings:
- "Beat our guidance for the third quarter" -- adjusted operating income of $90 million compared to guidance of $74 million to $79 million.
- "Increased our guidance for the fourth quarter" -- fourth-quarter guidance adjusted operating profit now $110 million to $115 million compared to $97 million to $112 million previously.
- "Meaningful" cash flow in the third quarter -- adjusted free cash flow (FCF) of $61.9 million compared to an outflow of $10.7 million in the previous quarter.
- "We are pulling forward our FY '27 guidance by one year at this time" -- management now expects to hit $460 million to $500 million in adjusted operating profit in 2026, a year ahead of the previous 2027 target.
- "In terms of earnings growth, we are just getting started and early in our cycle."
Why Carpenter's growth can continue
It's not hard to see why the market rushed to buy the stock, and I think the run can continue. As Thene notes, its specialty alloys are sold across the aerospace market from the original equipment manufacturer (OEM) to maintenance, repair, and overhaul (MRO) and to companies like Boeing and Airbus. As such, it stands to benefit even if there's a slowdown in airplane deliveries (the OEM market), leading to an increase in MRO demand as older planes run more.
Image source: Getty Images.
The company's margins also tend to contract and expand rapidly in line with revenue growth. If Thene is right that the aerospace market is in a supercycle, then plenty of growth will come in the coming years.
