I have selected three companies, Chart Industries, Inc. (NASDAQ:GTLS), Carpenter Technology Corporation (NYSE:CRS) and Allegheny Technologies Incorporated (NYSE:ATI), that produce several different kind of specialty metal products. Below I will analyze which one of these companies presents the best investment opportunity.
Riding the winds of change in the LNG world
Chart Industries, Inc. (NASDAQ:GTLS) manufactures engineered equipment that helps in the production, storage and the end-usage of industrial and hydrocarbon gasses. Chart Industries, Inc. (NASDAQ:GTLS) supplies its products primarily in the United States, Germany, China and the Czech Republic. The company works through its three segments: energy and chemicals, distribution and storage, and biomedical.
The largest end-user of Chart Industries, Inc. (NASDAQ:GTLS) is the energy industry. Chart is a technology leader that provides high-end equipment for the transport of liquefied natural gas, or LNG. The demand for natural gas as a transportation fuel is rising worldwide, which is causing an increase in demand for the LNG transport equipment. Natural gas/crude oil price spread still represents savings due to the use of LNG, and it provides many countries with the much-needed energy independence.
The distribution and storage segment of the company manufactures towable tanks and bulk, microbulk and satellite LNG storage tanks that are critical for the functionality of the LNG network. The energy and chemicals segment of the company will also benefit from this change as it can expect an increase in sales of its heat exchangers and cold boxes, as these two products are critical for the LNG networks. These two products are also demanded from the natural gas processing, industrial gas and olefin petrochemical industries.
The company’s biomedical segment is also expecting an increase in its sales because of the increase in biomedical research, led by international markets. The company’s EBITDA and net income figures have improved significantly from the year 2010, and I expect it to continue performing well.
Carpenter’s changing strategies
Carpenter Technology Corporation (NYSE:CRS) is a globally diversified company that is involved in the manufacture, fabrication and distribution of specialty metals. Half of the company’s revenues are sourced from outside the USA, of which the European region represents a large chunk. The company is working on its strategy of focusing on higher-margins and specialty metals. The building of a new metal facility in Huntsville, Alabama along with the acquisition of Amega West and Latrobe are a testament to this fact.
The company’s largest customer is the aerospace and defense industry, as it accounts for 49% of the revenue of the company. The demand from this industry has increased by 20% on s year-over-year basis and 10% on the quarter-over-quarter basis. This increase in demand was majorly due to the acquisition of Latrobe as it manufactures essential landing gears.
Carpenter Technology Corporation (NYSE:CRS)’s second largest customers are the companies engaged in the energy sector. Carpenter Technology Corporation (NYSE:CRS) sources as much as 16% of its revenue from this sector. The revenue from this source are also increasing, as Carpenter Technology Corporation (NYSE:CRS) was able to realize growth in ultra-premium materials for oil and gas completions. The acquisition of Amega West will diversify the company’s offerings related to drilling and oil extraction.
