It has been about a month since the last earnings report for Crane (CR Quick QuoteCR - Free Report) . Shares have lost about 8.9% in that time frame, underperforming the S&P 500.

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

Crane Beats on Q1 Earnings, Alters GAAP EPS View

Crane kept its earnings beat streak alive in the first quarter of 2022, thus delivering better-than-expected results for the fifth consecutive quarter. The quarterly earnings surpassed the Zacks Consensus Estimate by 7.7%. Sales surprise is 0.7%.

Adjusted earnings were $1.81 per share, surpassing the Zacks Consensus Estimate of $1.68. The bottom line expanded 9% from the year-ago quarter’s figure of $1.66. Sales growth and margin expansion drove the quarterly performance.

Revenue Details

In the quarter, Crane’s net sales were $801 million, reflecting growth of 3% from the year-ago quarter’s reading. Results reflect the strength in Crane’s core businesses.

The quarterly net sales surpassed the Zacks Consensus Estimate of $796 million.

Crane reports net sales under three segments, namely Process Flow Technologies, Payment & Merchandising Technologies, and Aerospace & Electronics.

The segmental information is briefly discussed below:

Revenues from Process Flow Technologies (representing 38.8% of the quarter’s total revenues) were $311 million, reflecting growth of 8% from the year-ago quarter’s tally. Results benefited from a gain of 10% in organic sales. However, movements in foreign currencies had an adverse impact of 2% on sales The segment’s order backlog was $372.4 million in the reported quarter, reflecting sequential growth of 4.1%.

Revenues from Payment & Merchandising Technologies (representing 41.6% of the quarter’s total revenues) totaled $333 million, decreasing 1% year over year due to a 3% downward movement in foreign currencies. Organic sales grew 1% from the year-ago quarter’s figure. The order backlog at the end of the reported quarter was $429 million, down 2.1% sequentially.

Revenues from the Aerospace & Electronics segment (representing 19.6% of the quarter’s total revenues) were $157 million, increasing 2% year over year. The order backlog at the end of the quarter was $508.4 million, up 10.6%, sequentially.

Margin Profile

In the first quarter, Crane’s cost of sales of $473.8 million reflected a 0.7% increase from the year-ago quarter’s number. The metric represented 59.1% of net sales compared with 60.4% in the year-ago quarter. Selling, general and administrative expenses increased 14.6% to 193.7 million. The same represented 24.2% of net sales compared with 21.7% in the year-ago quarter.

Adjusted operating income in the first quarter increased 10% year over year to $141 million, while margin expanded 110 basis points to 17.6%. Operating results gained from a favorable mix and higher volumes. Interest expenses, net, in the reported quarter were $11.1 million, down 18.4% year over year.

Balance Sheet and Cash Flow

Exiting the first quarter, Crane had cash and cash equivalents of $307.2 million, down 35.8% from $478.6 million at the end of the fourth quarter of 2021. The long-term debt balance was $842.7 million, compared with the previous quarter’s $842.4 million.

In the first three months of 2022, Crane made no repayment of commercial paper (maturity >90 days).

In the first three months of 2022, CR used net cash of $49.3 million from operating activities, compared with $47.6 million generated in the year-ago-period. Capital expenditure was $12.5 million, higher than $4.7 million spent in the previous year. Free cash outflow was $61.8 million, compared with 42.9 million free cash flow generated in the year ago period.

Shareholder-Friendly Policy

In first-quarter 2022, Crane used $26.7 million for paying out dividends, up 6.8% from the year-ago quarter’s level. Share reacquisitions in the quarter amounted to $175.8 million. It is worth noting that CR completed the previously announced share repurchase program worth $300 million in April 2022.

2022 Outlook

Crane adjusted its full-year GAAP earnings from continued operations to $6.35-$6.75 from the earlier issued projection of $6.85-$7.25. Management anticipates adjusted earnings per share of $7.00-$7.40 (excluding special items) for the year.

CR expects an operating cash flow of $410-$450 million and a capital expenditure of $60 million for 2022. Free cash flow is projected to be $350-$390 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -6.44% due to these changes.

VGM Scores

Currently, Crane has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Crane has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.