Carpenter Technology is the IBD Stock of the Day as shares break out of a double-bottom base following the company's new outlook.
The Philadelphia-based maker of high-performance specialty metals is among the best stocks in IBD's database, boasting the highest Composite Rating (97) and Relative Strength Rating (94) of 10 companies the specialty alloys industry group.
Carpenter reported a 58% jump in earnings to $1.88 per share on April 24, above the highest analyst estimate for the March-ended quarter. Sales rose 6% to $727 million, slightly below the FactSet consensus estimate of $729.8 million. Operating income climbed 81.5% to $137.8 million year over year.
The company raised its forecast for operating income to $520 million-$527 million for the fiscal year ending in June. It expects $146 million to $153 million in operating income for the current quarter.
Carpenter makes specialized metals used in a multitude of industries, including aerospace, health care and transportation. For example, it makes components for jet engines, alloys for electric-vehicle motors, hardened metals for armored vehicles and turbine blades and discs for power generation.
Its Specialty Alloys Operations, which comprise premium alloy and stainless steel operations, expanded adjusted operating margin to 29.1% from 21.4% in the year-ago quarter. That resulted in $151.4 million in operating income for the segment.
Best Stocks And Tariffs
Carpenter is dodging major tariff impacts, for now.
Nickel, its largest raw material input, is sourced mainly from Canada, and so far Canadian Nickel is exempt from tariffs, CEO Tony Thene told analysts in the earnings conference call.
While it's hard to predict where tariffs will end up as trade negotiations continue, " … based on what we know today, we anticipate limited impact," according to a transcript provided by FactSet.
The company, moreover, has surcharge mechanisms already in place to pass through higher raw materials costs to customers, Thene said. And there are few alternatives for Carpenter's highly specialized products. In some cases, Carpenter is the only supplier.
Best Stocks: Carpenter Technology Tops Buy Point
On the day the company reported quarterly results, Carpenter Technology stock topped the 198.48 buy point of a double-bottom base. Volume was about 80% above average and the relative strength line is near highs — two positives for the breakout.
Today, shares remain in the buy zone, which goes to 208.40, according to IBD MarketSurge pattern recognition.
Carpenter stock has surged as much as 188% from a breakout to new highs about a year ago and its previous base formed in November to January was a late-stage pattern that produced modest gains. It's difficult for any stock to continue rallying after such an advance.
But its latest base undercut the preceding base. That resets the stock's base count, which potentially sets it up for another long-term advance.
The stock was added to IBD Leaderboard Thursday.
Carpenter stock has a 21-day average true range (ATR) of 7.32%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs. There are exceptions, but given current market conditions, IBD generally suggests investors keep most of their portfolio focused on stocks with ATRs at or below 6%.
