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Crane (CR) Down 3.7% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Crane Company (CR - Free Report) . Shares have lost about 3.7% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Crane Beats Q1 Earnings & Revenues, Raises '17 View

Crane Co. kept its earnings streak alive, reporting better-than-expected results for first-quarter 2017. The company's earnings of $1.05 per share, surpassed the Zacks Consensus Estimate of $1.00 by 5%. Also, the bottom line increased roughly 13% over the year-ago tally of $0.93.

The company's revenues totaled $673.4 million, 3.2% higher than the Zacks Consensus Estimate of $652.5 million and up 2% year over year. The company’s core sales grew 4%, offset by 2% adverse impact from unfavorable foreign currency movements and certain adverse impacts from divestitures.

At the quarter end, total order backlog was $705.8 million, down 7% year over year.

Segmental Revenues: Crane generates revenues under four heads, results of which are briefly discussed below.

Revenues from Aerospace & Electronics totaled $163.4 million, down 5% year over year. Order backlog was $352.4 million, down 15.8%.

Payment & Merchandising Technologies generated revenues of $195.5 million, up 14% year over year. Order backlog was $85.8 million, up 42.1%.

Engineered Materials' revenues were $74.9 million, up 10% year over year. Order backlog for the segment increased 11.3% to $17.8 million.

Revenues from Fluid Handling decreased 3% year over year to $239.6 million. Order backlog was $249.8 million, down 5.2%.

Margins: In the quarter, Crane's cost of goods sold inched up 0.8% year over year and as a percentage of revenues came in at 63.8%, below 64.6% in the prior-year quarter. Gross margin grew 80 basis points (bps) to 36.2%. Selling, general and administrative expenses, as a percentage of revenues were 21.9% compared with 22.5% in the year-ago quarter.

Operating margin, before special items, increased 130 bps year over year to 14.3%.

Balance Sheet and Cash Flow: Exiting the first quarter, Crane had cash and cash equivalents of $504.8 million, slightly below $509.7 million at previous-quarter end. Long-term debt was roughly flat sequentially at $745.5 million.

In the quarter, the company's net cash generated from operating activities totaled $3.5 million versus $18 million used in the year-ago quarter. Capital spending fell 12.7% to $9.6 million. Dividend paid in the quarter was approximately $19.6 million.

Outlook: For 2017, Crane increased the lower-end of its previously issued earnings guidance of $4.30-$4.55 per share by $0.05 to $4.35-$4.55. Core sales will likely be flat to up 2%. Unfavorable foreign currency movements will adversely impact sales by 3% while divestitures will reduce sales growth by 0.5%.

Cash flow from operating activities is anticipated to be within $325-$355 million while capital spending is likely to total $50 million. Free cash flow is anticipated within $220--$250 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been two revisions higher for the current quarter compared to two lower. While looking back an additional 30 days, we can see even more upward momentum. There have been three moves up in the last two months.

Crane Company Price and Consensus

 

VGM Scores

At this time, the stock has an average Growth Score of 'C', however its Momentum is doing a bit better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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