A month has gone by since the last earnings report for Crane Company (CR - Free Report) . Shares have lost about 11.9% 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 of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Second-Quarter 2017 Highlights
Crane Company reported impressive results for second-quarter 2017, with earnings and revenues surpassing their respective Zacks Consensus Estimate by 0.86% and 0.82%.
Excluding the impact of special items, Crane's earnings came in at $1.17 per share, surpassing the Zacks Consensus Estimate of $1.16. However, the bottom-line decreased 2.8% from the year-ago quarter's tally of $1.21.
Revenues totaled $702.5 million, above the Zacks Consensus Estimate of $697 million but fell 1.4% from $712.2 million in second-quarter 2016. The company's core sales inched up 0.1% and acquisitions had 0.5% positive impact. These were more than offset by 1.9% adverse impact from unfavorable foreign currency movements.
At the quarter end, total order backlog was $689 million, down 2.4% sequentially.
Segmental Revenues: Crane generates revenues under four heads, results of which are briefly discussed below.
Revenues from Aerospace & Electronics segment totaled $171.1 million, down 9.6% year over year. It represented 24.4% of second-quarter revenues. Order backlog was $328.2 million, down 6.9% sequentially.
Payment & Merchandising Technologies segment generated revenues of $198.2 million, up 2.9% year over year. It represented 28.2% of second-quarter revenues. Order backlog was $87 million, up 1.4% sequentially.
Engineered Materials segment's revenues were $69.4 million, increasing 7.6% year over year. It represented 9.9% of second-quarter revenues. Order backlog for the segment decreased 16.3% sequentially to $14.9 million.
Revenues from Fluid Handling dipped 0.8% year over year to $263.8 million. It represented 37.5% of second-quarter revenues. Order backlog was $258.9 million, up 3.6% sequentially.
Margins: In the quarter, Crane's cost of goods sold declined 1.1% year over year and as a percentage of revenues came in at 63.2% versus 63.1% in the prior-year quarter. Gross margin fell 10 basis points (bps) to 36.8%. Selling, general and administrative expenses, as a percentage of revenues were 20.9% compared with 22.5% in the year-ago quarter.
Operating margin, before special items, increased 80 bps year over year to 15.9%.
Balance Sheet and Cash Flow: Exiting the second quarter, Crane's cash and cash equivalents were $509.3 million, above $504.8 million at previous-quarter end. Long-term debt was roughly flat sequentially at $745.7 million.
Net cash generated from operating activities totaled $66.9 million, down 4.2% year over year. Capital spending was $11.2 million, below $15.6 million spent in the year-ago quarter.
Dividend paid in the quarter was approximately $19.7 million. Also, the company invested $58 million for acquiring Westlock Controls and Microtronic during the quarter.
Outlook: For 2017, Crane reaffirmed its previously issued earnings guidance of $4.35-$4.55. Cash flow from operating activities is anticipated to be within $325-$355 million while capital spending is likely to total $50 million.
The company predicts uneven demand for payment and merchandising products. Also, it expects the ebbing impact from unfavorable foreign currency movements to be offset by higher commodity and input costs.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 5% due to these changes.
At this time, Crane Company's stock has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.