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Crane Co's Long-Term Prospects Impaired by Near-Term Risks

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We issued an updated research report on Crane Co.CR on Mar 29, 2016. The company offers solid long-term potential, but the exposure to headwinds is restricting its growth momentum in the near term.

Over time, Crane has served a wide customer base, in aerospace, electronics, hydrocarbon processing, petrochemical, chemical, power generation, automated merchandising, transportation and others end markets, with its diverse range of engineered industrial products. Geographically, the company has operations spread in North and South America, Europe, the Middle East, Asia and Australia.

In addition, Crane Co. consistently undertakes organic and inorganic initiatives to expand in existing and new markets as well as improve its product portfolio. Backed by these positives, the company targets to achieve 10% average annual earnings per share growth in the long run. Free cash flow conversion is anticipated to be 100% or more of net income.

However, Crane Co. is exposed to risks arising from adverse foreign currency movements, stiff competition and uncertain global economic conditions. We believe these headwinds can jeopardize the company's growth potential in the near term. For 2016, the company anticipates weak commodity prices, low industrial demand and adverse forex movements to restrict the top-line performance of its Fluid Handling segment. While earnings per share are expected to be flat to down 7%, adverse foreign currency movements will likely hurt the top line by 2%.

Also, difficulties or delays in research and development or production and services, apart from failure of new products and technologies in the market, may damage Crane Co.'s competitive position. In addition, non-compliance of any governmental regulations, especially in Aerospace & Electronics and Fluid Handling segments, can attract penalties, hurting the company's profitability.

Over the last 60 days, the Zacks Consensus Estimate on Crane Co. is pegged at $4.01 per share for 2016, while the same has inched up 0.2% to $4.38 per share for 2017. These estimates represent year-over-year decline of 2.82% in 2016 and growth of 9.05% in 2017.

Crane Co, with a market capitalization of $3.2 billion, currently carries a Zacks Rank #3 (Hold). On the other hand, some companies in the same sector have gained high Zacks investment rankings. Some of these stocks include Barloworld Ltd. BRRAY , CLARCOR Inc. CLC and Honeywell International Inc. HON . All three stocks carry a Zacks Rank #2 (Buy).

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HONEYWELL INTL (HON): Free Stock Analysis Report

CLARCOR INC (CLC): Free Stock Analysis Report

CRANE CO (CR): Free Stock Analysis Report

BARLOW LTD-ADR (BRRAY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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