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Crane (CR) Q4 Earnings & Revenues Miss Estimates, Down Y/Y

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Crane Co. CR reported weaker-than-expected fourth-quarter 2020 results. Its earnings and sales missed the Zacks Consensus Estimate by 8.3% and 2.8%, respectively.

Adjusted earnings in the reported quarter were $1.00 per share, missing the consensus estimate of $1.09. On a year-over-year basis, the bottom line declined 36.7% from $1.58 due to lower sales.

In 2020, the company’s adjusted earnings came in at $3.84, down 36.2% year-over-year.

Revenues

In the quarter under review, Crane’s net sales were $726.4 million, reflecting a decline of 13.4% from the year-ago quarter. Results were adversely impacted by a fall in core sales of $178 million, largely due to the coronavirus outbreak-led issues, partially offset by foreign exchange of $12 million, and a benefit of $55 million from acquisitions.

Crane’s net sales lagged the Zacks Consensus Estimate of $747 million.

In 2020, the company’s net sales were $2,936.9 million, down 10.5% on a year-over-year basis.

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 were $258 million, down 7% from the year-ago quarter. Results reflected a 14% decline in core sales, partially offset by benefits of 2% from foreign exchange and 5% from acquisitions. The segment’s order backlog was $313.4 million in the reported quarter, reflecting a sequential increase of 2.7%.

Revenues from Payment & Merchandising Technologies totaled $283 million, decreasing 10% year over year. Results were hurt by core sales decline of 25%, partially offset by a 13% benefit from acquisitions and 2% from foreign exchange. Order backlog at the end of the quarter was $347.6 million, up 28.7% sequentially.

Revenues from the Aerospace & Electronics were $143 million, declining 29% year over year. The fall was mainly attributable to a decline in core sales. Order backlog at the end of the quarter was $491.2 million, down 1.4% sequentially.

Revenues from the Engineered Materials declined 2% year over year to $43 million on lower sales to building products market. However, it was partially offset by higher sales to recreational vehicle customers. Order backlog at the end of the quarter was $12.8 million, up 15.3% sequentially.

Crane Co. Price, Consensus and EPS Surprise

Crane Co. Price, Consensus and EPS Surprise
Crane Co. Price, Consensus and EPS Surprise

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

Margin Profile

In the fourth quarter, Crane’s cost of sales decreased 38.2% year over year to $491.1 million. It represented 67.6% of net sales compared with 94.9% in the year-ago quarter. Selling, general and administrative expenses dipped 1.1% to $176.4 million. It represented 24.3% of net sales compared with 21.3% a year ago.

Operating income in the fourth quarter was $59 million against an operating loss of $135 million recorded in the year-ago-quarter. Notably, operating margin in the quarter was 8.1%.

Balance Sheet and Cash Flow

Exiting the fourth quarter, Crane had cash and cash equivalents of $551 million, up 1.2% from $544.6 million at the end of the last reported quarter. Long-term debt balance was marginally up sequentially to $842.9 million.

In 2020, the company generated net cash of $309.5 million from operating activities compared with $393.9 million in the previous year. Capital expenditure in the year was $34.1 million, down 50.4%.

In the fourth quarter, free cash flow was $88 million compared with $205 million in the year-ago quarter. In the fourth quarter, Crane used $25 million for paying dividends, whereas it distributed $23.1 million a year ago.

Outlook

For 2021, the company currently anticipates adjusted earnings per share of $4.90-$5.10. Sales are predicted to be about $3.05 billion, suggesting year-over-year core sales growth of about 2%. Free cash flow is projected to be $260-$290 million for the year.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks are AGCO Corporation AGCO, AptarGroup, Inc. ATR and Axon Enterprise, Inc. AAXN. While AGCO currently sports a Zacks Rank #1 (Strong Buy), AptarGroup and Axon Enterprise carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO delivered a positive earnings surprise of 434.48%, on average, in the trailing four quarters.

AptarGroup delivered a positive earnings surprise of 10.91%, on average, in the trailing four quarters.

Axon Enterprise delivered a positive earnings surprise of 30.28%, on average, in the trailing four quarters.

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