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Crane (CR) Posts Upbeat Q1 Earnings & Sales, Declares Dividend

Zacks Equity Research

Crane Co. CR kept its earnings streak alive in the first quarter of 2019. Its earnings beat estimates by 4.32% and sales surpassed the same by 5%. This is the company’s 14th consecutive quarter of recording impressive results. Along with this, it impressed shareholders with an announcement of paying a quarterly dividend.

Adjusted earnings in the reported quarter were $1.45 per share, surpassing the Zacks Consensus Estimate of $1.39. On a year-over-year basis, the bottom line of $1.31 increased 10.6%, driven by sales growth and margin improvement.

Organic Growth and Buyouts Drive Revenues

In the quarter under review, Crane’s net sales were $831.7 million, reflecting growth of 4.1% from the year-ago quarter. The improvement was driven by 1% gain from acquired assets and 6% organic sales growth, partially offset by 3% adverse impact of foreign currency translations.

Further, the top line surpassed the Zacks Consensus Estimate of $792 million.

The company reports net sales under four segments — Fluid Handling, Payment & Merchandising Technologies, Aerospace & Electronics, and Engineered Materials. The segmental information is briefly discussed below:

Revenues from the Fluid Handling segment were $273.7 million, reflecting growth of 2.7% from the year-ago figure. Results were influenced by 6% organic sales growth and 4% adverse impact of unfavorable movements in foreign currencies. This segment’s order backlog was $184.8 million in the reported quarter, reflecting sequential growth of 1.9%.

Revenues from Payment & Merchandising Technologies totaled $303.8 million, increasing 3.9% year over year. Improvement was primarily driven by 2% synergistic gains from buyouts and 5% core sales growth. However, unfavorable movements in foreign currencies had a negative 3% impact. Order backlog at the end of the reported quarter was $322.2 million, down 2.8% sequentially.

Revenues from the Aerospace & Electronics segment were $194.6 million, increasing 14.2% year over year. This improvement was mainly driven by core sales growth. Order backlog at the end of the quarter under review was $487.1 million, up 9.1% sequentially.

Revenues from the Engineered Materials segment decreased 14.5% year over year to $59.6 million due to weak business in the recreational vehicle end market. Order backlog at the end of the reported quarter was $12.3 million, down 17.4% sequentially.

Operating Margin Improves Y/Y

In the first quarter, Crane’s cost of sales grew 1.3% year over year to $528 million. It represented 63.5% of net sales compared with 65.2% in the year-ago quarter. Selling, general and administrative expenses increased 7% year over year to $190 million. It represented 22.8% of net sales versus 22.2% in the year-ago quarter.

Adjusted operating income in the quarter under review increased 12.3% year over year to $120.1 million. Moreover, adjusted operating margin increased 100 basis points to 14.4%.

Balance Sheet and Cash Flow

Exiting the first quarter, Crane had cash and cash equivalents of $256.8 million, down 25.2% from $343.4 million at the end of the last reported quarter. Long-term debt balance edged down 0.2% sequentially to $940.2 million.

In the first quarter, the company used net cash of $100.4 million for operating activities versus $74.2 million generated from operating activities in the year-ago quarter. Capital expenditure was $19.8 million, down 28% from $27.5 million in the first quarter of 2018. Free cash outflow in the quarter were $120.2 million versus cash flow of $46.7 million in the year-ago quarter.

Shareholder-Friendly Policy

In the first quarter, Crane used $23.4 million for paying dividends, with roughly $20.9 million distributed in the year-ago comparable quarter.

Concurrent with the earnings release, the company announced that its board of directors approved the payment of a quarterly dividend of 39 cents per share to shareholders of record as of May 31, 2019. The dividend payment will be made on Jun 10.

Outlook

In the quarters ahead, Crane is likely to benefit from growth investments, acquired assets, repositioning initiatives and focus on the development of products.

For 2019, the company maintained adjusted earnings per share projection at $6.25-$6.45. The projection reflects year-over-year growth of 6% at the mid-point. This excludes integration costs related to acquired assets of 7 cents and repositioning costs of 13 cents.

Revenues for the year will likely be $3.3 billion. Core sales will be down slightly and forex woes will represent a 2% headwind. Operating cash flow in the year is anticipated to be $425-$455 million and capital expenditure is expected to be $90 million. Free cash flow is projected to be $335-$365 million.

Crane Company Price, Consensus and EPS Surprise

 

Crane Company Price, Consensus and EPS Surprise | Crane Company Quote

Zacks Rank & Stocks to Consider

With a market capitalization of approximately $5.2 billion, Crane currently carries a Zacks Rank #3 (Hold).

Three better-ranked stocks in the industry are Carlisle Companies Incorporated CSL, Federal Signal Corporation FSS and Honeywell International Inc. HON. While Carlisle sports a Zacks Rank #1 (strong Buy), both Federal Signal and Honeywell carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for Carlisle and Honeywell have improved for the current year while remained stable for Federal Signal. Further, average earnings surprise for the last four quarters was positive 19.07% for Carlisle, 21.65% for Federal Signal and 3.50% for Honeywell International.

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