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With Boeing's (BA) safety and production issues making a lot of headlines and with BA shares trading at 52-week lows, it would make sense to wonder why an aerospace supplier like Carpenter Tech (CRS) would be seeing its stock surge to all-time highs. With it being a fairly slow news day, we wanted to take this opportunity to dig into the story as it's a company many people are not familiar with. And we wanted to profile it ahead of its Q1 (Sep) results next month.

• This supplier of premium specialty alloys (titanium, nickel, cobalt) recently closed out FY24 on a high note. In late July, CRS reported a hefty EPS beat for Q4 (Jun) and authorized a $400 mln share buyback plan. CRS's Aerospace & Defense segment, its largest segment by far, produced impressive results with revenue jumping 28% yr/yr and 19% sequentially to $376.3 mln.
• First, CRS noted that industry demand remains robust, as measured by passenger traffic, airline miles and airline operators' desire for new planes. The backlog for commercial airplane builds reported by Boeing and Airbus is now over 15,000 planes, or roughly nine years of demand. CRS also said that airline operators want the newest generation of airplanes to replace aging fleets, to realize the fuel efficiency and to meet the additional needed capacity.
• CRS concedes that there is some noise in the supply chain about build rates. However, the company counters that by explaining it has broad exposure to aerospace platforms. This includes narrow-body and widebody, Airbus and Boeing and MRO (maintenance, repair, overhaul) and OEM. For example, as new builds have lagged, MRO demand has remained elevated. As a result, customers may prioritize a different portfolio of products in the near-term.
• Looking ahead, CRS sees significantly higher demand on the horizon. The company is confident that there will be ongoing airplane build rate increases given the extraordinary current and increasing future demand. It has a large backlog of orders both in aerospace and other markets, like defense, energy and medical.
• Defense customers continue to request emergency orders to support elevated military activity levels due to ongoing world events. CRS will continue to prioritize these orders. In Medical, CRS saw another record quarter in JunQ with sales up 9% sequentially and 38% yr/yr. Medical customers continue to see strong market demand based on robust procedure backlogs. CRS is also seeing strong demand for power generation.

Overall, it sounds like CRS is not concerned about near term build rates. It is responding by shifting more focus to its MRO business, which makes sense because airlines are having to make due with current planes as they wait on new planes. Also, defense, medical and energy markets are performing well. On a final note, investors also need to keep in mind that even with modest build rate increases, CRS expects a hefty increase in operating income in FY 25 ($460-500 mln vs $354.1 mln in FY24).