Crane to Benefit From Acquisitions Amid Pandemic Scares
On Aug 18, we issued an updated research report on Crane Co. CR.
In the past three months, this Zacks Rank #3 (Hold) stock has returned 18.4% compared with the industry’s growth of 19%.
Present Scenario
Crane is poised to benefit from its exposure in diverse end-markets along with the focus on product development, growth investments and repositioning initiatives in the years ahead.
Also, the company’s acquisition of CIRCOR International’s Instrumentation & Sampling business (in January 2020) has been strengthening its process valve business. In addition, the buyout of Cummins Allison (in December 2019) has been adding value to the Crane Payment Innovations business. For 2020, the company believes that acquisitions will boost its sales by 7%.
In addition, it remains committed to rewarding shareholders handsomely through dividend payments and share buybacks. In the first half of 2020, the company used $50.4 million for paying out dividends, and repurchasing shares worth $70 million. Notably, the quarterly dividend rate was hiked by 10% in January 2020.
However, weakness across most of its end-markets on account of the coronavirus outbreak-led issues remains concerning for its top-line performance in the near term. For 2020, the company expects net sales of $2,800-$2.925 million, suggesting a decline of 10.9-14.7% from that reported in 2019. Notably, core sales are predicted to decline 17-21% year over year.
Moreover, the company’s high-debt profile poses a concern. For instance, in the last three years (2017-2019), its long-term debt rose 19.4% (CAGR). Notably, the metric was $842.5 million at the end of the second quarter of 2020, reflecting a marginal increase sequentially. Also, interest expenses in the quarter increased 26.3%. Further, an increase in debt levels can raise the company’s financial obligations.
Key Picks
Some better-ranked stocks from the same space are Griffon Corporation GFF, HC2 Holdings, Inc. HCHC and Danaher Corporation DHR. While Griffon sports a Zacks Rank #1 (Strong Buy), HC2 Holdings and Danaher carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Griffon delivered an earnings surprise of 117.00%, on average, in the trailing four quarters.
HC2 Holdings delivered an earnings surprise of 41.91%, on average, in the trailing four quarters.
Danaher delivered an earnings surprise of 10.83%, on average, in the trailing four quarters.
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