Carpenter Technology Corp.

The stable outlook reflects our expectation that robust end market demand and ongoing operational efficiency improvements will support Carpenter's operating performance over the next 24 months. Over the next two years, we expect EBITDA to grow somewhere between $30 million and $50 million while debt remains relatively flat, which will result in sustained lower debt leverage. We expect adjusted debt to EBITDA to remain well below 3x in fiscal 2019 and 2020 with EBITDA margins of approximately 15%. We could raise our rating on Carpenter if debt to EBITDA approaches 2x and if the company demonstrates the ability to maintain leverage at this level even under more volatile product demand conditions. This could follow from sustained growth in the aerospace

...Carpenter Technology Corp. has a strong competitive position in the aerospace market. We believe long-term positive demand trends in the engine manufacturing space partially mitigates its end market concentration in the aerospace and defense sector. With healthy commercial aircraft backlogs and expanding value-added products, Carpenter is well-positioned to capitalize on incremental demand due to its presence across all major aircraft engine platforms. We recognize however, the sector is highly cyclical and demand fluctuations can be influenced by many factors such as general economic conditions or overall airline sector performance. A downturn in this market would adversely affect demand for and price of its products, especially given the geographical concentration within the U.S. (approximately 70% of total sales in 2019). Ramping up its Athens facility remains a top priority, while Carpenter continues to focus on core growth areas. Carpenter continues to receive approvals and qualifications...

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