Crane Co. CR reported better-than-expected results for the second quarter of 2020. Its earnings and sales surpassed the Zacks Consensus Estimate by 36.2% and 10.8%, respectively.
Adjusted earnings in the reported quarter were 64 cents per share, beating the consensus estimate of 47 cents. On a year-over-year basis, the bottom line declined 59.5% from the year-ago quarter figure of $1.58 due to a decline in sales.
Revenues Decline Y/Y
In the quarter under review, Crane’s net sales were $678 million, reflecting a decline of 19.5% from the year-ago quarter. Results were adversely impacted by a fall in core sales of $203 million largely due to the coronavirus outbreak-led issues and forex woes of $8 million, partially offset by the benefit of $47 million from acquisitions.
Crane’s net sales beat the Zacks Consensus Estimate of $612 million.
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 $239 million, reflecting a decline of 18% from the year-ago quarter figure. Results reflected a 21% decline in core sales and a 2% impact of forex woes. The segment’s order backlog was $299 million in the reported quarter, reflecting a sequential increase of 1.9%.
Revenues from Payment & Merchandising Technologies totaled $248 million, decreasing 15% year over year. Results were adversely impacted by a core sales decline of 25%, and an adverse impact of 1% from forex woes, partially offset by an 11% benefit from acquisitions. Order backlog at the end of the reported quarter was $285.5 million, down 12.5% sequentially.
Revenues from the Aerospace & Electronics segment were $157 million, declining 23% 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 $506 million, down 7.6% sequentially.
Revenues from the Engineered Materials segment dipped 40% year over year to $34 million on lower sales to recreational vehicle customers. Order backlog at the end of the reported quarter was $10.1 million, down 6.5% sequentially.
Operating Margin Declines Y/Y
In the second quarter, Crane’s cost of sales decreased 15.5% year over year to $452.1 million. It represented 66.7% of net sales compared with 63.6% in the year-ago quarter. Selling, general and administrative expenses grew 6.3% year over year to $195.3 million. It represented 28.8% of net sales versus 21.8% in the year-ago quarter.
Operating income in the quarter under review decreased 74.8% year over year to $31 million. Moreover, adjusted operating margin contracted 670 basis points to 8.9%.
Balance Sheet and Cash Flow
Exiting the second quarter, Crane had cash and cash equivalents of $592.1 million, up 95.5% from $302.8 million at the end of the last reported quarter. Long-term debt balance was marginally up sequentially to $842.5 million.
In the first six months of 2020, the company generated net cash of $76.6 million from operating activities compared with $52.5 million generated in the year-ago comparable period. Capital expenditure in the same period was $13.5 million, down 62.6% year over year.
In the second quarter, free cash flow was $106.4 million versus $136.6 million in the year-ago quarter. In the quarter, Crane used $24.9 million for paying dividends, whereas it distributed $23.3 million in the year-ago comparable quarter.
For 2020, the company currently anticipates adjusted earnings per share of $3.30-$4.10 compared with $3.00-$4.25 mentioned earlier. Sales are predicted to be $2,800-$2.925 million, suggesting a year-over-year core sales decline of 17-21%. Free cash flow is projected to be $200-$250 million for 2020.
Zacks Rank & Other Stocks to Consider
The company currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks are Griffon Corporation GFF, Danaher Corporation DHR and Macquarie Infrastructure Company MIC. While Griffon and Danaher currently sport a Zacks Rank #1 (Strong Buy), Macquarie carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Griffon delivered an earnings surprise of 21.76%, on average, in the trailing four quarters.
Danaher delivered an earnings surprise of 10.83%, on average, in the trailing four quarters.
Macquarie delivered an earnings surprise of 3.13%, on average, in the trailing four quarters.
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