May 11, 2022

Crane (CR) down 1.1% since last earnings report: can it rebound?

IIt’s been about a month since Crane’s (CR) last earnings report. Stocks lost about 1.1% during this period, outperforming the S&P 500.

Will the recent negative trend continue until its next earnings release, or is Crane set for a breakout? Before we dive into the reaction of investors and analysts lately, let’s take a look at the latest earnings report to better understand the important factors.

Crane beats fourth-quarter earnings estimates, gives promising view

Crane maintained its earnings streak in the fourth quarter of 2021, with the fourth straight quarter of better-than-expected results. Quarterly earnings beat the Zacks consensus estimate of 11.61%. The sales surprise is 3.65%.

Adjusted earnings were $1.25 per share, beating Zacks consensus estimate of $1.12. Net income rose 35.9% from the quarterly figure of 92 cents a year ago. Sales growth and margin expansion drove quarterly performance.

For 2021, the company’s adjusted earnings were $6.55 per share, beating Zacks’ consensus estimate of $6.42. Again, the net result reflects an increase of 85.6% over the previous year’s figure of $3.53.

Net income also beat the company’s forecast of $6.35 to $6.45 per share for the year.

Income Details

During the quarter, Crane’s net sales were $770.5 million, reflecting growth of 12.7% over the prior year quarter. The results reflect the strength of the company’s core businesses.

Quarterly net sales exceeded Zacks’ consensus estimate of $743.4 million.

The company reports net sales in three segments: Process Flow Technologies, Payment & Merchandising Technologies, and Aerospace & Electronics.

Segment information is briefly discussed below:

Revenue from Process Flow Technologies (representing 38.8% of total revenue for the quarter) was $298.7 million, reflecting growth of 15.9% over the prior year quarter. Results benefited from a 15% gain in organic sales and 1% in foreign exchange movements. The segment’s backlog was $357.9 million in the current quarter, reflecting sequential growth of 1.8%.

Payment & Merchandising Technologies revenue (representing 40.7% of total revenue in the quarter) totaled $313.7 million, up 11% year-over-year. Organic sales increased 11% from the prior year quarter. Backlog at the end of the reported quarter was $438 million, up 12.9% sequentially.

Aerospace & Electronics revenue (representing 20.5% of total revenue in the quarter) was $158.1 million, up 10.3% year-over-year. Backlog at the end of the quarter was $459.8 million, down 3.9% sequentially.

For 2021, the company’s revenue totaled $3.18 billion, up 15.2% year-over-year. Revenue exceeded the consensus estimate by 0.63% and exceeded management’s projection of $3.15 billion.

Margin profile

In the fourth quarter, Crane’s cost of sales of $482.5 million reflected a 5.4% increase over the prior year quarter. It accounted for 62.6% of net sales compared to 67% in the prior year quarter. Selling, general and administrative expenses increased 16.8% to $200.9 million. It accounted for 26.1% of net sales compared to 25.2% in the prior year quarter.

Fourth-quarter adjusted operating income increased 33% year-over-year to $93.1 million, while margin increased 190 basis points to 12.1%. Operating results benefited from a favorable mix and increased volumes. Interest expense, net, in the reported quarter was $10.9 million, down 21.6% year-over-year.

Balance sheet and cash flow

At the end of the fourth quarter, Crane had cash and cash equivalents of $478.6 million, up 6.2% from $450.8 million at the end of the third quarter. The long-term debt balance was $842.4 million, a slight change from $842.2 million in the prior quarter.

In 2021, the company made a repayment of $27.1 million of commercial paper (maturity >90 days). Term loan repayments totaled $348.1 million.

In 2021, the company generated $466.7 million in net cash from operating activities, up 64.3% from the prior year. Capital expenditures were $51.7 million, higher than the $32.9 million spent in 2020. Free cash flow increased 65.2% year over year to 415 millions of dollars.

Notably, cash performance for the year was better than Crane’s expectations of $400-425 million for operating cash flow and $400-425 million for free cash flow. Capital expenditures were below company expectations by $60 million.

Shareholder friendly policy

In 2021, Crane used $100.6 million to pay dividends, up 0.2% from the prior year. Share repurchases during the year were $96.3 million, up from over $70 million in 2020. Coming out of 2021, the company is due to repurchase $200 million of its stock. .

Outlook

Confident in its growth opportunities, Crane forecasts a 10% year-over-year profit increase for 2022. It also believes that strong cash generation will help fund organic investments, inorganic businesses and rewards for shareholders.

The company forecasts adjusted earnings per share of $7.00 to $7.40 for the year. Sales are expected to reach $3.3 billion, with base sales growth of 4-6%. Foreign currency fluctuations should have a negative impact of 1.5% on sales.

The company’s expenses for the year are expected to be $75 million and the adjusted tax rate will likely be 21%. The company forecasts operating cash flow of $410-450 million and capital expenditures of $60 million for 2022. Free cash flow is expected to be $350-390 million.

How have the estimates changed since then?

It turns out that the estimate revision has stalled over the past month.

The consensus estimate changed by -5.2% due to these changes.

VGM Scores

Right now, Crane has an average growth score of C, but its Momentum score is faring much better with an A. Tracing a somewhat similar path, the stock has been given a B rating on the side of the value, which puts it at the top. 40% for this investment strategy.

Overall, the title has an overall VGM score of A. If you’re not focused on a strategy, this score is the one you should be interested in.

Outlook

Crane has a Zacks rank of #3 (Hold). We expect the title to return online in the coming months.

Just Released: Zacks’ 7 Best Stocks For Today

Experts have pulled out 7 stocks from the Zacks #1 Ranking 220 Strong Buys list that have beaten the market more than 2 times with an astonishing average gain of +25.4% per year.

These 7s were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>

Click to get this free report

Crane Co. (CR): Free Inventory Analysis Report

To read this article on Zacks.com, click here.

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