Carpenter Technology(NYSE: CRS) shares rose by 20% in April, according to data provided by S&P Global Market Intelligence. It's a powerful move, but that only tells half the story -- the stock is up 45.1% since the start of April, including its performance in May.
Why Carpenter Technology stock is soaring
The market anticipated the aerospace-focused company's earnings based on a strong reporting season from its peers and customers. This is especially relevant given that there were plenty of fears going into the earnings season for commercial aerospace-focused companies.
The aerospace market is divided into two related segments: the original equipment manufacturer (OEM) market and the aftermarket. These segments have subtly different dynamics.
Demand in the aftermarket comes from the use of equipment, in other words, from growth in flight departures. It's also a function of the type of airplanes and equipment making flight departures -- just as older cars tend to need more servicing, so do airplanes and aerospace equipment.
OEM demand comes from the original manufacturer's equipment production, which is closely tied to new airplane production in commercial aerospace. Investors were concerned that the OEM market would be weak because of Boeing's sharp decline in airplane production. For example, Boeing delivered 110 Boeing 737 planes in the fourth quarter of 2023, only to deliver just 67 in the first quarter of 2024.
The concerns proved unfounded
Fast-forward to earnings season and aerospace suppliers continue to report bumper conditions. For example, GE Aerospace raised its full-year guidance due to its commercial aerospace business. Meanwhile, RTX reported commercial aftermarket sales up 11% in the first quarter, with its OEM sales up a whopping 33%.
Image source: Getty Images.
Carpenter Technology's earnings
Carpenter Technology also reported a great quarter, with its fiscal third-quarter sales rising 28% year over year. In addition, management raised its full-year 2024 guidance and told investors it would hit its medium-term aim of adjusted operating income of $460 million to $500 million a year earlier than planned in 2026, instead of 2027.
As for the question of Boeing's delivery delays, Carpenter CEO Tony Thene told investors, "We see no impact near term and anticipate no impact longer term" and later reminded investors, "We supply to OEM, MRO, narrowbody, widebody, Boeing, Airbus, what it might be."
All told, Carpenter remains one of the best ways to play the recovery in the aerospace market, and the recent results help to underline that argument.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends RTX. The Motley Fool has a disclosure policy.
