Crane (CR) Q3 Earnings & Revenues Surpass Estimates, Up Y/Y

Crane Co. CR reported impressive third-quarter 2021 results. Its earnings surpassed the Zacks Consensus Estimate by 37.96% and sales exceeded the same by 7.72%.

Adjusted earnings were $1.89 per share, surpassing the Zacks Consensus Estimate of $1.37. The bottom line expanded 80% from the year-ago quarter figure of $1.05 on the back of sales growth and improved margin.

Revenues Details

In the quarter, Crane’s net sales were $833.5 million, reflecting growth of 21.4% from the year-ago quarter. Results benefited from core sales growth of 20% and contribution of 2% from movements in foreign currencies.

The company’s net sales surpassed the Zacks Consensus Estimate of $774 million.

The company reports net sales under three segments — Process Flow Technologies, Payment & Merchandising Technologies, and Aerospace & Electronics. In May 2021, it entered into a deal to divest its Engineered Materials segment. Effective second-quarter 2021, it represents the Engineered Materials segment as discontinued operations. The segmental information is briefly discussed below:

Revenues from Process Flow Technologies were $299.1 million, reflecting growth of 19% from the year-ago quarter. The results benefited from a gain of 16% from organic sales and 3% from movements in foreign currencies. The segment’s order backlog was $351.4 million in the reported quarter, reflecting sequential growth of 2.1%.

Revenues from Payment & Merchandising Technologies totaled $365.8 million, increasing 32% year over year. Organic sales grew 30% while foreign currency translation had a positive impact of 2%. Order backlog at the end of the reported quarter was $387.9 million, up 3.5% sequentially.

Revenues from the Aerospace & Electronics segment were $168.6 million, increasing 7% year over year. Order backlog at the end of the quarter was $478.5 million, up 1.2% sequentially.

Margin Profile

In the third quarter, Crane’s cost of sales of $509.1 million reflected a 14.5% increase from the year-ago quarter. It represented 61.1% of net sales compared with 64.8% in the year-ago quarter. Selling, general and administrative expenses increased 12.3% to $186.2 million. It represented 22.3% of net sales compared with 24.2% in the year-ago quarter.

Adjusted operating income in the third quarter increased 69% year over year to $139.6 million. Adjusted operating margin grew 480 basis points to 16.8%. Interest expenses, net, in the reported quarter were $11 million, down 23.6% year over year.

Balance Sheet and Cash Flow

Exiting the third quarter, Crane had cash and cash equivalents of $450.8 million, up 16.6% from $386.7 million at the end of the second quarter. Long-term debt balance was $842.2 million, down from $843.4 million sequentially.

In the reported quarter, the company did not make any repayment of commercial paper (maturity >90 days).

In the first nine months of 2021, it generated net cash of $311.7 million from operating activities compared with $197 million in the year-ago period. Capital expenditure was $25.3 million, up 26.5% year over year.

Free cash flow in the reported quarter was $102.8 million compared with $114.9 million in the year-ago quarter.

Shareholder-Friendly Policy

In the third quarter, Crane used $25.2 million for paying dividends, increasing 0.8% from the year-ago quarter. No shares were repurchased in the reported quarter.

Concurrent with the earnings release, the company announced that its board of directors has approved the payment of a quarterly cash dividend of 43 cents per share. The company will pay out the dividend on Dec 8 to shareholders on record as of Nov 30, 2021.

Outlook

Based on the third quarter’s impressive results and strengthening end-market business, Crane increased its projections for 2021.

It now anticipates adjusted earnings per share of $6.35-$6.45 for the year, higher than $5.95-$6.15 mentioned previously.

Sales are predicted to be $3,150 million compared with the previously stated $3,100 million. Acquired assets will likely benefit sales by $5 million (guidance maintained), whereas movements in foreign currencies are expected to boost sales by 2.5% compared with 3.5% stated previously. Core sales are expected to increase 10-12% year over year, marking an increase from 7-9% stated earlier.

Corporate expenses for the year are expected to be $90 million, up from $80 million mentioned earlier. Adjusted tax rate will likely be 17.5% compared with 20.5% estimated earlier. The company expects operating cash flow of $400-$425 million and capital expenditure of $60 million for 2021. Free cash flow is projected to be $340-$365 million.

Zacks Rank & Stocks to Consider

Crane currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the Zacks Industrial Products sector are AZZ (NYSE:AZZ) Inc. AZZ, Brady Corporation BRC, and Johnson Controls (NYSE:JCI) International plc JCI. While AZZ currently sports a Zacks Rank #1 (Strong Buy), Brady and Johnson Controls carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AZZ delivered an earnings surprise of 25.47%, on average, in the trailing four quarters.

Brady delivered an earnings surprise of 2.49%, on average, in the trailing four quarters.

Johnson Controls delivered an earnings surprise of 4.43%, on average, in the trailing four quarters.

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