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Crane (CR) Q1 Earnings and Revenues Miss Estimates, Down Y/Y

Zacks Equity Research
·5 mins read

Crane Co. CR reported weaker-than-expected results for the first quarter of 2020. Its earnings and sales missed estimates by 6.5% and 3.3%, respectively.

Adjusted earnings in the reported quarter were $1.15 per share, missing the Zacks Consensus Estimate of $1.23. On a year-over-year basis, the bottom line declined 20.7% from the year-ago quarter figure of $1.45 due to poor sales performance.

Revenues Decline Y/Y

In the quarter under review, Crane’s net sales were $797.9 million, reflecting a decline of 4.1% from the year-ago quarter. Results were adversely impacted by a fall in core sales of $80 million largely due to coronavirus outbreak-led issues and forex woes of $7 million, partially offset by the benefit of $54 million from acquisitions.

Crane’s net sales missed the Zacks Consensus Estimate of $825 million.

Crane Company Price, Consensus and EPS Surprise

 

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

Crane Company price-consensus-eps-surprise-chart | Crane Company Quote

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 $256.7 million, reflecting a decline of 6% from the year-ago quarter figure. Results were adversely impacted by forex woes and an organic sales decline. The segment’s order backlog was $293.4 million in the reported quarter, reflecting a sequential increase of 9.7%.

Revenues from Payment & Merchandising Technologies totaled $297.4 million, decreasing 2% year over year. Results were adversely impacted by an organic sales decline of 15%, and an adverse impact of 1% from forex woes, partially offset by 15% benefit from acquisitions. Order backlog at the end of the reported quarter was $326.3 million, up 4.8% sequentially.

Revenues from the Aerospace & Electronics segment were $192.9 million, declining 1% year over year. The fall was mainly attributable to a decline in core sales. Order backlog at the end of the quarter under review was $547.5 million, down 3.5% sequentially.

Revenues from the Engineered Materials segment dipped 15% year over year to $50.9 million on weak business in the recreational vehicle end market. Order backlog at the end of the reported quarter was $10.8 million, up 14.9% sequentially.

Operating Margin Declines Y/Y

In the first quarter, Crane’s cost of sales decreased 2.8% year over year to $513.3 million. It represented 64.3% of net sales compared with 63.5% in the year-ago quarter. Selling, general and administrative expenses grew 3.2% year over year to $196 million. It represented 24.6% of net sales versus 22.8% in the year-ago quarter.

Operating income in the quarter under review decreased 21.9% year over year to $89 million. Moreover, adjusted operating margin contracted 260 basis points to 11.1%.

Balance Sheet and Cash Flow

Exiting the first quarter, Crane had cash and cash equivalents of $302.8 million, down 23.1% from $393.9 million at the end of the last reported quarter. Long-term debt balance was marginally up sequentially to $842.2 million.

In the first quarter, the company used net cash of $35.5 million from operating activities compared with $100.4 million used in the year-ago quarter. Capital expenditure was $7.8 million, down 60.6% year over year. Free cash flow in the quarter was $43.3 million versus $120.2 million in the year-ago quarter.

In the first quarter, Crane used $25.5 million for paying dividends, with $23.4 million distributed in the year-ago comparable quarter. Also, $70 million worth shares were reacquired by the company in the quarter.

Outlook

On uncertainties, regarding the impacts of the coronavirus outbreak on financial and operating results, Crane has withdrawn its previously issued guidance for 2020.

For 2020, the company currently anticipates adjusted earnings per share of $3.00-$4.25. Sales are predicted to be $2.75-$2.95 billion, suggesting a year-over-year core sales decline of 17-22%. It anticipates operating cash flow of $245-$295 million and capital expenditure of $45 million for 2020. Free cash flow is projected to be $200-$250 million.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks are Intellicheck, Inc. IDN, Broadwind Energy, Inc. BWEN and Acco Brands Corporation ACCO. All the companies presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intellicheck delivered a positive earnings surprise of 36.91%, on average, in the trailing four quarters.

Broadwind delivered a positive earnings surprise of 10.42%, on average, in the trailing four quarters.

Acco Brands delivered a positive earnings surprise of 19.04%, on average, in the trailing four quarters.

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