Carpenter Technology (CRS) Misses Q1 EPS by 32c
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Carpenter Technology (NYSE: CRS) reported Q1 EPS of ($0.08), $0.32 worse than the analyst estimate of $0.24. Revenue for the quarter came in at $339.8 million versus the consensus estimate of $429.24 million.
“Our first quarter results were significantly impacted by lower sales driven primarily by volatility and uncertainty in specific Aerospace end-use sub-markets, the moderating global Transportation end-use market and the ongoing weakness in Energy,” said Tony Thene, Carpenter's President and CEO. “The industry wide and macro-economic challenges we are facing magnified the impacts of our historical sequential seasonality declines and drove volume lower than we had anticipated. The lower sequential sales, even with a modest mix improvement and continued cost savings, resulted in a $29 million reduction in pre-tax income, most of which is related to the lower Aerospace and Defense sales, as compared with the fourth quarter of fiscal year 2016.”
“The Aerospace market is presenting challenges for the overall industry given the transition that is taking place and its impact across various sub-markets. The new engine platform builds are starting to ramp-up and we see strong demand in this sub-market. However, we are experiencing a new level of market uncertainty across other Aerospace sub-markets driven by reductions in program specific build rates and ongoing supply chain inventory reduction and consolidation. Given the market uncertainty, recent order patterns within our fastener, structural and aerospace distribution sub-markets, which tend to be more transactional in nature, have been below expectations. While this presents a challenging environment, we continue to believe in our long-term growth potential in the Aerospace end-use market given its underlying fundamentals, our participation across the new engine platforms and the strength of our total Aerospace product portfolio. We remain well positioned to benefit as the industry navigates the current transition and broader market demand recovers."
Mr. Thene concluded, "Moving forward, we will continue to actively manage our business given the industry headwinds we are experiencing across some of our end-use markets. This includes further implementing the Carpenter Operating Model, which produced significant savings in fiscal year 2016 and is now being rolled out across all our facilities as we remain highly focused on improving operating efficiency and reducing our operating costs. Our most recent action was the freeze of our largest defined benefit pension plan which is expected to result in approximately $50 million of annual run rate net cost savings. We believe that the benefits of this ongoing momentum on operating efficiencies together with the further implementation of the Carpenter Operating Model will be enhanced as market demand recovers. Although several of our end-use markets are challenged and we will be influenced by them, we will be relentless in our cost management and product expansion across adjacent markets and applications. This mindset, combined with the potential of our Athens facility, powder business and other growth opportunities, positions Carpenter for long-term sustainable growth.”
For earnings history and earnings-related data on Carpenter Technology (CRS) click here.
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