EUR 850.00 For Business Accounts Only

Morningstar | CRS Updated Forecasts and Estimates from 14 Aug 2018

Carpenter Technology uses a variety of raw materials, including nickel, cobalt, titanium, and ferrous scrap, to produce high-value specialty alloys and metals. Its product lines must meet complex customer specifications and are designed to withstand environments of extreme heat, pressure, and corrosion. To manufacture these specialized product offerings, Carpenter employs production methods that are difficult to replicate. As a result, the market structure for specialty alloy and high-performance metal production is very different than that associated with the production of commodity-grade metal products such as flat-rolled steel. Carpenter operates in a small, well-defined niche and participates in the highest-value decile of specialty steel production.Carpenter is highly leveraged to the rapidly growing aerospace end market and invested further in the space via its February 2012 acquisition of Latrobe Specialty Metals, a leading producer of alloys used in aircraft landing gear. We expect demand from aerospace customers to grow materially over our explicit forecast period as production of next-generation aircraft ramps up. Not only will Carpenter benefit from increasing build rates, but its shipment volume growth will be supported by the increasing amount of lightweight metals per plane as aerospace companies look to increase fuel efficiency. The energy industry constitutes Carpenter’s second-largest end market, as the company manufactures metals and components for exploration and production customers. To better service growing demand for its aerospace and energy product lines, the company invested $500 million to construct a state-of-the-art manufacturing facility in Athens, Alabama.To manage the volatility associated with its raw material costs, Carpenter uses pricing surcharges, indexing mechanisms, and base price adjustments. This effectively allows the company to pass on raw material price fluctuations to its customers at the point of sale. For the 25% of its sales that are consummated via fixed pricing arrangements, the company uses material forward contracts to mitigate the impact of changing raw material prices.