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Crane (CR) to Gain From End-Market Strength, Inorganic Moves

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Investors seeking exposure in the conglomerate space may find Crane Co. CR an attractive investment pick. The producer of diversified engineered industrial products seems well-positioned to benefit from end-market growth opportunities. Also, its earnings estimates have been revised upward. The company is based in Stamford, CT, and has a $5.5-billion market capitalization.

Crane presently carries a Zacks Rank #2 (Buy). It belongs to the Zacks Diversified Operations industry, which is currently at the top 40% (with the rank of 102) of more than 250 Zacks industries.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past three months, the company’s shares have gained 24.4% as compared with the industry’s growth of 5.6% and the S&P 500’s rise of 6%.




Below we discussed why Crane is a worthy investment option.

End-Market Strength: The company anticipates strengthening businesses in end markets to drive its segmental performances in the quarters ahead. For the Payment and Merchandising Technologies segment, it expects growth in productivity, security and automation businesses to be advantageous. Then again, rising businesses in thermal management, power conversion, sensing, electrification and space end markets will aid the company’s Aerospace and Electronics segment.

For the Fluid Handling segment, Crane will benefit from growth in businesses in the chemical, pharmaceutical and general industrial markets.

Solid Projections: Growth opportunities in end markets (as discussed above) along with solid product offerings, repositioning actions and an efficient management team will likely be beneficial for Crane in the quarters ahead. Also, investments for innovation, localization, product development, technology and commercial excellence will likely aid the company.

For 2021, Crane anticipates net sales of $3,080 million, suggesting an increase of 5% from the previous year’s reported figure. Organic sales are expected to grow 2-4% year over year. Notably, the company previously expected net sales of $3,055 million. As for segments, organic sales are anticipated to increase 0.5% for Fluid Handling, 6% for Payment and Merchandising Technologies, and 20% for Engineered Materials.

Also, it expects earnings per share of $5.00-$5.20 for 2021, higher than $4.90-$5.10 mentioned previously. The new projection suggests growth of 33% from the previous year’s reported figure.

Benefits From Inorganic Actions: Crane has been benefiting from acquisitions over time. In 2020, the company used $169.5 million on making acquisitions. Notably, buyouts boosted its sales by 6.8% in 2020. It is worth mentioning here that Crane added CIRCOR International’s Instrumentation & Sampling business to its portfolio in January 2020.

For 2021, the company anticipates acquisitions to boost its sales by $5 million.

Shareholders’ Rewards: Crane has been rewarding its shareholders with dividend payments and share buybacks over time. In 2020, it distributed dividends of $100.4 million to its shareholders, reflecting an increase of 7.7% from the previous year. Also, it invested $70 million for buying back shares.

Notably, the company announced a hike of 10% in its quarterly dividend rate this January. A healthy cash flow position will likely help Crane reward shareholders. For 2021, the company anticipates free cash flow of $260-$290 million.

Earnings Estimate Revisions: Crane’s earnings estimates have increased in the past 60 days. Currently, the Zacks Consensus Estimate for earnings is pegged at $1.27 for the first quarter and $1.25 for the second quarter, suggesting increases of 13.4% and 13.6% from the 60-day-ago respective figures.

Crane Co. Price and Consensus

Crane Co. Price and Consensus
Crane Co. Price and Consensus

Crane Co. price-consensus-chart | Crane Co. Quote

In addition, the consensus estimate for 2021 has moved 5.3% north to $5.13 in the past 60 days.

Price Performance Versus Other Industry Players

Crane’s shares have outperformed other companies in the industry, including 3M Company MMM, Carlisle Companies Incorporated CSL and Danaher Corporation DHR. In the past three months, shares of 3M have gained 8.7% and that of Carlisle Companies increased 0.3%, while Danaher’s shares lost 4.5%.

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