Carpenter Set to Build Free Cash Flow
Fear of energy end-market weakness provides an attractive entry point for long-term investors.
Shares of Carpenter Technology (CRS) traded sharply higher after the company released its fiscal 2016 first-quarter earnings report, but we think the results were mixed. It really was a tale of two segments in the first quarter, as the specialty alloys operations division exceeded our expectations but the performance engineered products segment delivered disappointing results.
The SAO division delivered $41 million of operating income, a 67% increase relative to the same period last year even though sales fell 15%. The negative impact of lower volumes was more than offset by lower operating costs and a more favorable product mix. We expect the division to carry this momentum forward, and we've increased our near-term operating margin forecasts accordingly.
Andrew Lane does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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