Here's Why Carpenter Technology Soared Again This Week

Shares in specialty alloy materials and process solutions company Carpenter Technology (NYSE: CRS) rose by 10.4% in the week to Friday morning. The move represents another leg up for a stock up 222% over the last year and 446% over the last three years. The catalyst for this week's move was its positive investor update on Tuesday.

Carpenter Technology updates the market

As I've previously discussed, Carpenter is a company with heavy exposure to aerospace and defense (59% of sales in 2024) and the case for buying the stock rests on the aerospace recovery. Carpenter is a company with particularly good upside exposure because it has relatively high fixed costs, so revenue increases tend to drop down into significant margin expansion.

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CRS Gross Profit Margin data by YCharts

Fortunately, the latest update confirms this positive trend, with management telling investors to expect adjusted operating income to increase from $500 million to $520 million in 2025 to $765 million to $800 million in 2027. Moreover, management told investors, "Fiscal year 2027 is not our peak; market dynamics are only strengthening, which will drive growth past our FY27 earnings target."

Investors wasted no time in pricing this outlook and the updated guidance into the stock.

Image source: Getty Images.

What's next for Carpenter Technology

As long as the aerospace up cycle exists (driven by demand for travel and new airplanes) then Carpenter has the potential to provide the market with positive surprises like this week's update. As such, the stock remains a useful option for aerospace bulls.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.