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Crane Marginally Beats 2Q Earnings

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Diversified machine manufacturer Crane Co. (CR - Free Report) reported mixed results for the second quarter of 2013. Recurring earnings per share for the quarter came in at $1.06, increasing 10.4% from 96 cents recorded in the year-ago quarter, led by increased margins. Recurring earnings beat the Zacks Consensus Estimate of $1.05 by a penny.

On a GAAP basis, the company reported quarterly earnings of 93 cents per share from continuing operations compared with $1.07 per share in second quarter 2012.


Revenues in the reported quarter decreased 1.4% year over year to $648.7 million from $657.7 million in the year-ago period as a result of a decline in core sales and adverse impact of foreign currency translation. Sales also comprehensively missed the Zacks Consensus Estimate of $666.0 million.


Crane’s cost of sales in the quarter fell 2.3% to $426.0 million. Selling, general and administrative expenses represented 20.6% of sales at $133.9 million. Adjusted operating profit increased 13.7% in the quarter to $95.7 million. Adjusted operating margin was 14.8% in the reported quarter, up 200 basis points (bps) year over year.

Segment Details

Aerospace & Electronics segment generated revenues of $172.4 million in the reported quarter compared with $178.6 million in the year-ago quarter. The decline was brought about by downward trends in the Aerospace Group as well as Electronics Group sales. Moreover, lower margins in the Electronics Group offset the high margins of Aerospace Group. The segment recorded an operating margin of 21.5%, decreasing 30 bps year over year.

Engineered Materials segment’s sales improved 5.9% year over year to $57.7 million, resulting from higher sales to the recreational vehicle equipment manufacturers. Adjusted operating profit margin increased 380 bps to 15.9% due to higher sales and savings achieved from 2012 repositioning actions.

Revenue from the Merchandising Systems was recorded at $84.8 million, down 13.1% year over year. Adjusted operating profit margin dropped 120 bps to 10.5%, due to lower sales of the Vending Solutions business.

Fluid Handling segment revenue increased 2.1% to $333.8 million owing to higher core sales which were offset by a negative foreign currency impact. The repositioning activities undertaken in 2012 improved the adjusted operating profit margin by 340 bps to 16.2%.

Financial Update

Exiting the second quarter, Crane’s cash and cash equivalents were $420.9 million, against $384.6 million at the close of the preceding quarter. Long-term debt remained flat at $399.1 million with the first quarter of 2013.

Cash provided by operating activities was $30.9 million in the quarter, declining from the $58.9 million provided in the year-ago quarter. Capital expenditure in the quarter remained flat from prior-year period at $6.6 million.

In the reported quarter, Crane increased its quarterly dividend by 7.1% to 30 cents a share from 28 cents a share.


Based on the lower-than-expected revenue growth, Crane lowered the higher end of the earnings expectations for 2013. Earnings per share for the year are now expected to be in the range of $4.10 - $4.25 compared with $4.10 - $4.30 expected earlier. Crane reaffirmed its free cash flow guidance in the range of $190 million to $220 million in 2013.  

Subsequent Events

Crane received an approval from the European Commission for the company’s pending acquisition of privately-owned MEI Conlux Holdings, subject to certain conditions. Crane is required to provide remedies related to the divestiture of B2B bill recycler product line and licensing in Europe for the Currenza C2 coin recycler product line. Both the product lines fall under the Merchandising Systems segment. Subject to the satisfaction of the criteria, the acquisition is expected to take place in the fourth quarter of 2013.

Other Stocks to Consider

General Electric Company (GE - Free Report) released its second quarter results on Jul 19, 2013. The company reported earnings per share of 36 cents, beating the Zacks Consensus Estimate of 35 cents by a penny.

Carlisle Companies Incorporated (CSL - Free Report) is expected to release its second quarter results before the market opens on Jul 23, 2013. The Zacks Consensus Estimate for the quarter is $1.34.

Macquarie Infrastructure Company LLC (MIC - Free Report) is expected to release its second quarter results after the market closes on Jul 31, 2013. The Zacks Consensus Estimate for the quarter is 97 cents.

Crane currently carries a Zacks Rank #3 (Hold).

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