We issued an updated research report on Crane Co. (CR - Free Report) on Nov 26.
This conglomerate currently carries a Zacks Rank #2 (Buy). Its market capitalization is approximately $5.1 billion.
Let’s delve deeper and discuss why investors should consider adding Crane’s stock to their portfolio.
Financial Performance & Outlook: Over time, Crane has been delivering better-than-expected results. The company surpassed estimates in the past four quarters, the average positive earnings surprise being 11.72%. In the last reported quarter (ended September 2018), its bottom line increased 11.72% on the back of improvement in core sales and margins.
Crane believes solid demand for products in end-markets served, as well as repositioning initiatives and efforts to reduce debts, to be advantageous in the quarters ahead. For 2018, the company increased its adjusted earnings per share projection from $5.60-$5.80 to $5.80-$5.90. Further, free cash flow is now anticipated to be $260-$290 million versus $250-$280 million mentioned earlier.
Growth Opportunities in Segments: Crane operates through four segments — Fluid Handling, Payment & Merchandising Technologies, Aerospace & Electronics, and Engineered Materials. Strengthening business in three of the four segments is a boon for the company.
The company believes that improving end-market businesses for the Fluid Handling segment are likely to be a boon. Core sales are likely to slightly surpass 3% growth target for 2018. Payment & Merchandising Technologies gains from healthy Merchandising Systems and Crane Payment Innovations businesses. Also, Crane Currency buyout is an added advantage, with integration activities progressing well. In addition, Aerospace & Electronics is gaining from new programs and ramp-up deliveries of narrow-body platforms.
For 2018, Crane anticipates core sales growth to be approximately at the mid-point of 2-4% projection.
Inorganic Initiatives: One of the attractive features of Crane is its acquisitive nature. In the first nine months of 2018, payments for acquisitions (net of cash acquired) amounted to approximately $648 million. Further, buyouts added roughly 18.9% to sales growth in the third quarter of 2018.
In January 2018, the company acquired Crane & Co., Inc. (Crane Currency), banknotes and related security features supplier. Earnings per share accretion from the Crane Currency buyout are expected to be roughly $1 by 2021.
Share Price Performance & Earnings Estimates: Impressive financial performance and solid outlook for 2018 supported positive sentiments on the stock. It’s worth noting here that the company’s share price has yielded 1.3% return in the past month. This share price gain is better than the industry’s 2.4% decline during the same period.
Moreover, earnings estimates on Crane for 2018 have improved in the past 30 days. Currently, the Zacks Consensus Estimate for earnings per share is pegged at $5.89 for 2018, reflecting growth 0.3% from the 30-day-ago tally. Moreover, estimates reflect year-over-year growth of 30%.
Crane Company Price and Consensus