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Crane Company (CR) Displays Bright Prospects, Risks Remain
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On Aug 26, we issued an updated research report on Crane Company (CR - Free Report) .
Year to date, this Zacks Rank #3 (Hold) stock has returned 0.9% compared with the industry’s growth of 9.9%.
Existing Scenario
Crane anticipates gaining from its focus on product development, growth investments, acquired assets and repositioning initiatives in the upcoming quarters. The company started some repositioning activities for the Payment & Merchandising, Fluid Handling and Aerospace & Electronics segments in the fourth quarter of 2017 to improve profitability and better serve customers. These initiatives are anticipated to deliver earnings accretion of 35 cents per share by 2020.
Also, Crane has been steadily strengthening business through acquisitions. In this regard, its buyout of Crane Currency (January 2018) is worth mentioning. The buyout has strengthened the company’s foothold in the currency and payments market. Notably, for the 2018-2021 period, the company believes that Crane Currency buyout will strengthen earnings by $1.00 per share.
Markedly, Crane remains highly committed toward increasing its shareholders’ wealth through dividend payments. Notably, in first-half 2019, it distributed dividends amounting to $46.7 million, reflecting an increase of 11.7% from the comparable period a year ago. Notably, the company hiked the quarterly dividend rate by 11% in January 2019.
However, high debt level is concerning. Notably, in the last five years (2014-2018), its long-term debt rose 4.7% (CAGR). The metric totaled $940 million at the end of second-quarter 2019. It incurred interest expense of $23.3 million in the first half of 2019. Further, costs associated with repositioning activities can be concerning and might put pressure on its margins. The company is experiencing weakness in Payment & Merchandising Technologies, and Engineered Materials segments due to lower sales from inventory destocking. As a matter of fact, persistence of softness in these segments will be detrimental to its top-line results.
In addition, analysts have become increasingly bearish on Crane. In the past couple of months, the Zacks Consensus Estimate for 2019 earnings has decreased from $6.40 to $6.39 on account of two downward estimate revisions.
Stocks to Consider
Some better-ranked stocks in the same space are Federal Signal Corporation (FSS - Free Report) , Carlisle Companies Incorporated (CSL - Free Report) and United Technologies Corporation . While Federal Signal sports a Zacks Rank #1 (Strong Buy), Carlisle and United Technologies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Federal Signal delivered average earnings surprise of 16.48% in the trailing four quarters.
Carlisle pulled off average positive earnings surprise of 17.16% in the trailing four quarters.
United Technologies delivered average earnings surprise of 13.19% in the trailing four quarters.
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This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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Crane Company (CR) Displays Bright Prospects, Risks Remain
On Aug 26, we issued an updated research report on Crane Company (CR - Free Report) .
Year to date, this Zacks Rank #3 (Hold) stock has returned 0.9% compared with the industry’s growth of 9.9%.
Existing Scenario
Crane anticipates gaining from its focus on product development, growth investments, acquired assets and repositioning initiatives in the upcoming quarters. The company started some repositioning activities for the Payment & Merchandising, Fluid Handling and Aerospace & Electronics segments in the fourth quarter of 2017 to improve profitability and better serve customers. These initiatives are anticipated to deliver earnings accretion of 35 cents per share by 2020.
Also, Crane has been steadily strengthening business through acquisitions. In this regard, its buyout of Crane Currency (January 2018) is worth mentioning. The buyout has strengthened the company’s foothold in the currency and payments market. Notably, for the 2018-2021 period, the company believes that Crane Currency buyout will strengthen earnings by $1.00 per share.
Markedly, Crane remains highly committed toward increasing its shareholders’ wealth through dividend payments. Notably, in first-half 2019, it distributed dividends amounting to $46.7 million, reflecting an increase of 11.7% from the comparable period a year ago. Notably, the company hiked the quarterly dividend rate by 11% in January 2019.
However, high debt level is concerning. Notably, in the last five years (2014-2018), its long-term debt rose 4.7% (CAGR). The metric totaled $940 million at the end of second-quarter 2019. It incurred interest expense of $23.3 million in the first half of 2019. Further, costs associated with repositioning activities can be concerning and might put pressure on its margins.
The company is experiencing weakness in Payment & Merchandising Technologies, and Engineered Materials segments due to lower sales from inventory destocking. As a matter of fact, persistence of softness in these segments will be detrimental to its top-line results.
In addition, analysts have become increasingly bearish on Crane. In the past couple of months, the Zacks Consensus Estimate for 2019 earnings has decreased from $6.40 to $6.39 on account of two downward estimate revisions.
Stocks to Consider
Some better-ranked stocks in the same space are Federal Signal Corporation (FSS - Free Report) , Carlisle Companies Incorporated (CSL - Free Report) and United Technologies Corporation . While Federal Signal sports a Zacks Rank #1 (Strong Buy), Carlisle and United Technologies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Federal Signal delivered average earnings surprise of 16.48% in the trailing four quarters.
Carlisle pulled off average positive earnings surprise of 17.16% in the trailing four quarters.
United Technologies delivered average earnings surprise of 13.19% in the trailing four quarters.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>