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Crane (CR) Beats Q1 Earnings and Sales Estimates, Ups View

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Crane Co. (CR - Free Report) delivered impressive results for the first quarter of 2021. Its earnings surpassed the Zacks Consensus Estimate by 26.72%, whereas sales exceeded the same by 7.29%.

Better-than-expected results and increased projections seem to have boosted sentiments for the stock. The company’s shares gained 2.91% yesterday, ending the trading session at $97.50.

Adjusted earnings in the reported quarter were $1.66 per share, surpassing the Zacks Consensus Estimate of $1.31. On a year-over-year basis, the bottom line expanded 44.3% from the year-ago quarter figure of $1.15 on the back of sales growth and improved margin.

Revenues Details

In the quarter under review, Crane’s net sales were $833.5 million, reflecting growth of 4.5% from the year-ago quarter. Results benefited from core sales growth of 1%, contribution of 3% from movements in foreign currencies and 1% gain from acquired assets.

Also, Crane’s net sales surpassed the Zacks Consensus Estimate of $777 million.

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 segment were $288 million, reflecting growth of 12.2% from the year-ago quarter figure. The results benefited from a 6% gain from organic sales, 5% from movements in foreign currencies and 2% from acquisitions. The segment’s order backlog was $325.4 million in the reported quarter, reflecting sequential growth of 3.8%.

Revenues from Payment & Merchandising Technologies totaled $337.5 million, increasing 13.5% year over year. Organic sales in the quarter grew 9%, while foreign currency translation had a positive impact of 4%. Order backlog at the end of the reported quarter was $337 million, down 3% sequentially.

Revenues from the Aerospace & Electronics segment were $154.1 million, down 20.1% year over year. Order backlog at the end of the quarter under review was $481.6 million, down 2% sequentially.

Revenues from the Engineered Materials segment increased 5.9% year over year to $53.9 million. Order backlog at the end of the reported quarter was $17 million, up 32.8% sequentially.

Margin Profile

In the first quarter, Crane’s cost of sales at $513.6 million represented a marginal increase from the year-ago quarter. It represented 61.6% of net sales compared with 64.3% in the year-ago quarter. Selling, general and administrative expenses decreased 11.5% year over year to $173.4 million. It represented 20.8% of net sales versus 24.6% in the year-ago quarter.

Adjusted operating income in the quarter under review increased 39.7% year over year to $134.7 million. Moreover, adjusted operating margin grew 420 basis points to 16.2%. Interest expenses, net, in the reported quarter were $13.2 million, up 9.1% year over year.

Balance Sheet and Cash Flow

Exiting the first quarter, Crane had cash and cash equivalents of $578.4 million, up 5% from $551 million at the end of the last reported quarter. Long-term debt balance was flat sequentially at $843.2 million.

In the reported quarter, the company repaid $27.1 million worth of commercial paper (maturity >90 days).

In the first quarter of 2021, it generated net cash of $50.2 million from operating activities as compared with $35.5 million net cash used in the year-ago quarter. Capital expenditure was $4.9 million, down 37.2% year over year. Free cash flow in the reported quarter was $45.3 million versus an outflow of $43.3 million in the year-ago quarter.

Shareholder-Friendly Policy

In the first quarter, Crane used $25 million for paying dividends, decreasing 2% from the year-ago quarter. Notably, no share was repurchased in the reported quarter.

Concurrent with the earnings release, the company announced that its board of directors approved the payment of a quarterly cash dividend of 43 cents per share. The company will pay out the dividend on Jun 9 to shareholders of record as of May 28, 2021.

Outlook

Based on the first quarter’s impressive results and strengthening end-market business, Crane increased its projections for 2021.

It now anticipates adjusted earnings per share of $5.65-$5.85 for the year, higher than $5.00-$5.20 mentioned previously.

Sales are predicted to be $3,185 million as compared with the previously stated $3,080 million. Acquired assets will likely benefit sales by $5 million (guidance maintained), whereas movements in foreign currencies are expected to boost sales by 2.5% versus 1.5% stated previously. Core sales are expected to increase 4-6% year over year, marking an increase from 2-4% stated earlier.

Corporate expenses in the year are expected to be $77 million, up from $65 million mentioned earlier. Adjusted tax rate will likely be 21% versus 21.5% in the year-ago quarter. The company anticipates operating cash flow of $375-$405 million and capital expenditure of $75 million for 2021. Free cash flow is projected to be $300-$330 million.

Crane Co. Price, Consensus and EPS Surprise

Crane Co. Price, Consensus and EPS Surprise

Crane Co. price-consensus-eps-surprise-chart | Crane Co. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $5.5 billion, Crane currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Three other companies in the industry with an earnings beat in the first quarter of 2021 are General Electric Co. (GE - Free Report) , 3M Co. (MMM - Free Report) and Danaher Corp. (DHR - Free Report) .  While General Electric’s earnings surpassed estimates by 50% in the reported quarter, earnings beat for 3M was 23.11% and for Danaher, it was 50.90%.

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