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CRS – CDS 134bps, iCDS 103bps, Negative Case iCDS 144bps, 2030 7.625% Bond YTW of 6.541%, iYTW of 5.274%, Ba3 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
January 14, 2025
Cash bond markets are overstating CRS’s credit risk with a YTW of 6.541% relative to an Intrinsic YTW of 5.274%. Furthermore, Moody’s is materially overstating the firm’s fundamental credit risk, with its Ba3 credit rating five notches lower than Valens’ IG4+ (Baa1) credit rating.
Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. CRS’s compensation metrics framework should incentivize management to improve all three value drivers: sales, margins, and asset utilization, which should drive Uniform ROA improvement and lead to increased cash flows available for servicing obligations going forward. Additionally, all members of management are material owners of CRS equity relative to their annual compensation, indicating they may be aligned with shareholders to pursue long-term value creation for the company.
Earnings Call Forensics™ of the firm’s Q1 2025 (10/24/2024) earnings call highlights that management is confident they have strong execution, market position, and necessary capabilities to get record earnings in an uncertain aerospace environment.
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