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

Crane Co. CR reported better-than-expected third-quarter 2020 results. Its earnings and sales surpassed the Zacks Consensus Estimate by 28.1% and 9.4%, respectively.

Adjusted earnings in the reported quarter were $1.05 per share, beating the consensus estimate of 82 cents. On a year-over-year basis, the bottom line declined 25% from $1.40 due to lower sales.

Revenues

In the quarter under review, Crane’s net sales were $734.8 million, reflecting a decline of 4.9% from the year-ago quarter. Results were adversely impacted by a fall in core sales of $104 million largely due to the coronavirus outbreak-led issues, partially offset by foreign exchange of $10 million, and a benefit of $57 million from acquisitions.

Crane’s net sales beat the Zacks Consensus Estimate of $672 million.

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 were $252 million, down 8.7% from the year-ago quarter. Results reflected a 15% decline in core sales, partially offset by benefits of 1% from foreign exchange and 5% from acquisitions. The segment’s order backlog was $304.8 million in the reported quarter, reflecting a sequential increase of 2.1%.

Revenues from Payment & Merchandising Technologies totaled $277 million, increasing 11.2% year over year. Results were driven by a 17% benefit from acquisitions and 2% from foreign exchange, partially offset by a core sales decline of 8%. Order backlog at the end of the quarter was $270.1 million, down 5.4% sequentially.

Revenues from the Aerospace & Electronics were $157 million, declining 20.3% year over year. The fall was mainly attributable to a decline in core sales. Order backlog at the end of the third quarter was $498.1 million, down 1.5% sequentially.

Revenues from the Engineered Materials declined 4% year over year to $48 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 $11.1 million, up 9.9% sequentially.

Lower Operating Margin

In the third quarter, Crane’s cost of sales decreased 2.9% year over year to $480 million. It represented 65.3% of net sales compared with 64% in the year-ago quarter. Selling, general and administrative expenses inched up 0.8% to $169.9 million. It represented 23.1% of net sales compared with 21.8% a year ago.

Operating income in the third quarter decreased 22% year over year to $85 million. Moreover, adjusted operating margin contracted 240 basis points to 12.4%.

Balance Sheet and Cash Flow

Exiting the third quarter, Crane had cash and cash equivalents of $544.6 million, down 8% from $592.1 million at the end of the last reported quarter. Long-term debt balance was marginally up sequentially to $842.7 million.

In the first nine months of 2020, the company generated net cash of $208.1 million from operating activities compared with $171 million in the year-ago comparable period. Capital expenditure in the same period was $20.6 million, down 59.5%.

In the third quarter, free cash flow was $124.4 million compared with $103.7 million in the year-ago quarter. In the quarter, Crane used $25 million for paying dividends, whereas it distributed $23.4 million a year ago.

Outlook

For 2020, the company currently anticipates adjusted earnings per share of $3.75-$4.00 compared with $3.30-$4.10 projected earlier. Sales are predicted to be $2,900-$2,950 million, suggesting year-over-year core sales decline of nearly 17-19%. Free cash flow is projected to be $230-$260 million for 2020 compared with the previous outlook of $200-$250 million.

Zacks Rank & Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the industry are Danaher Corporation DHR, ITT Inc. ITT and Raven Industries, Inc. RAVN. While Danaher sports a Zacks Rank #1 (Strong Buy), ITT and Raven carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Danaher delivered a trailing four-quarter positive earnings surprise of 17%, on average.

ITT delivered a trailing four-quarter positive earnings surprise of 20.5%, on average.

Raven delivered a trailing four-quarter positive earnings surprise of 212.5%, on average.

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