Earnings Miss for Crane in 1Q

Zacks

The diversified machinery company, Crane Co. (CR) released its first quarter 2013 results on Apr 23. Earnings per share for the quarter were recorded at $1.04, increasing 20.9% from the 86 cents recorded in the year-ago quarter, led by increased margins. However, earnings lagged the Zacks Consensus Estimate of $1.05 by a penny.

Revenue

Revenues in the reported period dropped 2.8% year over year to $627.6 million from $645.6 million as a result of a decline in core sales as well as impact of foreign currency fluctuations. Sales also missed the Zacks Consensus Estimate of $665.0 million by 5.6%.

Costs/Profits

Crane’s cost of sales in the quarter dropped 4.6% to $409.8 million. Selling, general and administrative expenses represented 20.9% of sales at $130.9 million. Operating profit increased 14.7% in the quarter to $89.8 million. Operating margin was 14.3% in the reported quarter, up 220 basis points (bps) year over year. 

Segment Details

Aerospace & Electronics segment generated revenues of $164.9 million against $175.2 million in the year-ago quarter. The decline was brought about by declines in the Aerospace Group as well as Electronics Group sales. However, tight cost control measures improved the operating profit of the segment by 5.0% to $40.1 million.

Engineered Materials segment’s sales improved 4.0% year-over-year to $60.2 million, resulting from higher sales to the recreational vehicle equipment manufacturers. Operating profit increased 2.0% to $8.6 million due to higher sales.

Revenue from the Merchandising Systems was recorded at $89.5 million, increasing 2.0% year-over-year. Operating profit jumped 116.0% to $10.2 million, due to higher sales and lower costs in the Payment Solutions and Vending Solutions businesses.

Fluid Handling segmental revenue declined 4.0% to $313.0 million. Total sales were affected by lower core sales as well as foreign currency impact. However, strict cost control initiatives improved operating profit by 7.0% to $45.9 million.

Balance Sheet/Cash Flow

Exiting the first quarter, Crane’s cash and cash equivalents were $384.6 million, against $423.9 million at the close of preceding quarter. Long-term debt increased marginally to $399.1 million from the fourth quarter of 2012.

Crane’s cash used in operating activities was recorded at $20.4 million in the quarter, improving from the $42.8 million used in the year-ago quarter. Capital expenditure in the quarter was recorded at $5.5 million, against $7.2 million in the first quarter of 2012.

Outlook

Based on the current performance of the business, Crane’s management reaffirmed its guidance for the year 2013. Core sales in the year 2013 are expected to grow by 1% to 3%, excluding acquisitions and foreign currency impact. Moreover, earnings per share for the year are expected to be in the range of $4.10 to $4.30 against the $3.70 recorded in 2012. Crane also expects its free cash flow in the range from $190.0 million to $220.0 million in 2013.  

Stocks to Consider

Crane currently carries a Zacks Rank #2 (Buy). Other stocks to watch out for in the industry are Hutchison Whampoa Ltd. (HUWHY), Carlisle Companies Incorporated (CSL) and Honeywell International Inc. (HON); each carrying a Zacks Rank #2 (Buy).

Read the Full Research Report on HON

Read the Full Research Report on CSL

Read the Full Research Report on HUWHY

Read the Full Research Report on CR

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