JPMorgan says this steelmaker could could gain more than 20% from here

Carpenter Technology has multiple avenues of growth over the next few years, according to JPMorgan. Analyst Bennett Moore initiated coverage of the U.S.-based stainless steel and alloys manufacturer with an overweight rating and a price target of $220. That forecasts suggests about 21.7% upside for the stock, which has soared more than 155% this year. “Shares have rallied … on the back of strong demand, solid execution, and an attractive earnings outlook, and we feel the company is well positioned to capture further upside,” Moore said in a Thursday note. “We also feel investors should take comfort in management’s conservative and realistic goal setting, which have consistently been exceeded.” Moore’s investment thesis is built on the company’s robust demand for its mostly customer-specific premium products, which he said gives Carpenter strong pricing power and supported its position as an “indispensable supplier.” He noted that structural tailwinds are driving long-term demand for Carpenter’s highest-margin products, particularly in aerospace — with aging airplane fleets and fuel efficiency needs — in the medical market and in energy through data centers’ power needs. Its largest market is in aerospace and defense, with comprises more than half of Carpenter’s net sales, according to the note. Moore added that Carpenter has also seen improving cash generation that supports increased shareholder returns, as well as its dividend and $400 million buyback program announced in late July. “Having demonstrated success through a clear focus on the three P’s – productivity, pricing, and product mix – we anticipate top line (ex surcharge) and operating income growing at 12%/25% CAGRs over the next three years,” Moore said.