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Why Is Crane (CR) Down 9% Since Last Earnings Report?
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A month has gone by since the last earnings report for Crane (CR - Free Report) . Shares have lost about 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 catalysts.
Crane Beats Q4 Earnings and Sales Estimates
Crane reported better-than-expected results for the fourth quarter of 2019. Its earnings and sales surpassed estimates by 0.6% and 3.2%, respectively.
Adjusted earnings in the reported quarter were $1.58 per share, surpassing the Zacks Consensus Estimate of $1.57. On a year-over-year basis, the bottom line declined 3.7% from the year-ago quarter figure of $1.64 due to poor sales performance.
For 2019, the company’s adjusted earnings were $6.02 per share, surpassing the Zacks Consensus Estimate of $6.01. On a year-over-year basis, the bottom line increased 0.5%.
Revenues Decline Y/Y
In the quarter under review, Crane’s net sales were $837.5 million, reflecting a decline of 0.3% from the year-ago quarter. Results were adversely impacted by forex woes of $4 million, offset by rise in core sales of $2 million.
However, Crane’s net sales surpassed the Zacks Consensus Estimate of $811.9 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 $277 million, reflecting a decline of 1% from the year-ago quarter figure. Results were adversely impacted by forex woes and organic sales decline. The segment’s order backlog was $267 million in the reported quarter, reflecting a sequential decline of 1.9%.
Revenues from Payment & Merchandising Technologies totaled $314.6 million, increasing 0.6% year over year. Organic sales in the quarter grew 2%, while forex woes had an adverse impact of 1%. Order backlog at the end of the reported quarter was $311.4 million, up 6.7% sequentially.
Revenues from the Aerospace & Electronics segment were $202.5 million, rising 3.1% year over year. The improvement was mainly driven by core sales growth. Order backlog at the end of the quarter under review was $567.4 million, up 0.5% sequentially.
Revenues from the Engineered Materials segment dipped 14.4% year over year to $43.4 million on weak business in the recreational vehicle end market. Order backlog at the end of the reported quarter was $9.4 million, down 6.9% sequentially.
For 2019, the company’s net sales were $3,283.1 million, down 1.9% year over year. However, the top line lagged the Zacks Consensus Estimate of $3.26 billion.
Operating Margin Increases Y/Y
In the fourth quarter, Crane’s cost of sales increased 45.9% year over year to $794.6 million. It represented 94.9% of net sales compared with 64.9% in the year-ago quarter. Selling, general and administrative expenses grew 4.3% year over year to $178.3 million. It represented 21.3% of net sales versus 20.4% in the year-ago quarter.
Adjusted operating income in the quarter under review increased 2.9% year over year to $128.1 million. Moreover, adjusted operating margin grew 50 basis points to 15.3%.
Balance Sheet and Cash Flow
Exiting the fourth quarter, Crane had cash and cash equivalents of $393.9 million, up 1.3% from $388.8 million at the end of the last reported quarter. Long-term debt balance was down 9.9% sequentially to $842 million.
In the fourth quarter, the company generated net cash of $222.9 million from operating activities, suggesting growth of 16.5% from the year-ago quarter. Capital expenditure was $17.9 million, down 46.1% year over year. Free cash flow in the quarter was $205 million versus $158.2 million in the year-ago quarter.
In the fourth quarter, Crane used $23.1 million for paying dividends, with $20.8 million distributed in the year-ago comparable quarter. Also, $79.9 million worth shares were reacquired by the company in the quarter.
Outlook
For 2020, Crane anticipates adjusted earnings per share of $6.20-$6.50. Sales are predicted to be $3.5 billion. Acquired assets will likely benefit sales by 8%, while forex woes will adversely impact sales by 0.5-1%. Core sales are expected to decline slightly.
For Fluid Handling, Crane predicts subdued end-market environment and margin expansion in 2020. Organic growth will likely be positive and margin will probably increase for Payment & Merchandising Technologies. The segment will likely face lower demand from the U.S. government at Crane Currency, while acquisition of Cummins Allison might initially adversely impact margins. For Aerospace & Electronics, the company expects headwinds from stalled production of 737-MAX to impact performance.
It anticipates operating cash flow of $405-$435 million and capital expenditure of $75 million for 2020. Free cash flow is projected to be $330-$360 million.
In addition, the company anticipates the buyouts of Cummins Allison, and CIRCOR International’s Instrumentation & Sampling business to boost earnings by 15 cents per share in 2020 and by 25 cents by 2022.
Also, Crane’s proactive repositioning actions for Fluid Handling are predicted to yield savings of $10 million in 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -20.25% due to these changes.
VGM Scores
At this time, Crane has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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 this revision 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.
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Why Is Crane (CR) Down 9% Since Last Earnings Report?
A month has gone by since the last earnings report for Crane (CR - Free Report) . Shares have lost about 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 catalysts.
Crane Beats Q4 Earnings and Sales Estimates
Crane reported better-than-expected results for the fourth quarter of 2019. Its earnings and sales surpassed estimates by 0.6% and 3.2%, respectively.
Adjusted earnings in the reported quarter were $1.58 per share, surpassing the Zacks Consensus Estimate of $1.57. On a year-over-year basis, the bottom line declined 3.7% from the year-ago quarter figure of $1.64 due to poor sales performance.
For 2019, the company’s adjusted earnings were $6.02 per share, surpassing the Zacks Consensus Estimate of $6.01. On a year-over-year basis, the bottom line increased 0.5%.
Revenues Decline Y/Y
In the quarter under review, Crane’s net sales were $837.5 million, reflecting a decline of 0.3% from the year-ago quarter. Results were adversely impacted by forex woes of $4 million, offset by rise in core sales of $2 million.
However, Crane’s net sales surpassed the Zacks Consensus Estimate of $811.9 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 $277 million, reflecting a decline of 1% from the year-ago quarter figure. Results were adversely impacted by forex woes and organic sales decline. The segment’s order backlog was $267 million in the reported quarter, reflecting a sequential decline of 1.9%.
Revenues from Payment & Merchandising Technologies totaled $314.6 million, increasing 0.6% year over year. Organic sales in the quarter grew 2%, while forex woes had an adverse impact of 1%. Order backlog at the end of the reported quarter was $311.4 million, up 6.7% sequentially.
Revenues from the Aerospace & Electronics segment were $202.5 million, rising 3.1% year over year. The improvement was mainly driven by core sales growth. Order backlog at the end of the quarter under review was $567.4 million, up 0.5% sequentially.
Revenues from the Engineered Materials segment dipped 14.4% year over year to $43.4 million on weak business in the recreational vehicle end market. Order backlog at the end of the reported quarter was $9.4 million, down 6.9% sequentially.
For 2019, the company’s net sales were $3,283.1 million, down 1.9% year over year. However, the top line lagged the Zacks Consensus Estimate of $3.26 billion.
Operating Margin Increases Y/Y
In the fourth quarter, Crane’s cost of sales increased 45.9% year over year to $794.6 million. It represented 94.9% of net sales compared with 64.9% in the year-ago quarter. Selling, general and administrative expenses grew 4.3% year over year to $178.3 million. It represented 21.3% of net sales versus 20.4% in the year-ago quarter.
Adjusted operating income in the quarter under review increased 2.9% year over year to $128.1 million. Moreover, adjusted operating margin grew 50 basis points to 15.3%.
Balance Sheet and Cash Flow
Exiting the fourth quarter, Crane had cash and cash equivalents of $393.9 million, up 1.3% from $388.8 million at the end of the last reported quarter. Long-term debt balance was down 9.9% sequentially to $842 million.
In the fourth quarter, the company generated net cash of $222.9 million from operating activities, suggesting growth of 16.5% from the year-ago quarter. Capital expenditure was $17.9 million, down 46.1% year over year. Free cash flow in the quarter was $205 million versus $158.2 million in the year-ago quarter.
In the fourth quarter, Crane used $23.1 million for paying dividends, with $20.8 million distributed in the year-ago comparable quarter. Also, $79.9 million worth shares were reacquired by the company in the quarter.
Outlook
For 2020, Crane anticipates adjusted earnings per share of $6.20-$6.50. Sales are predicted to be $3.5 billion. Acquired assets will likely benefit sales by 8%, while forex woes will adversely impact sales by 0.5-1%. Core sales are expected to decline slightly.
For Fluid Handling, Crane predicts subdued end-market environment and margin expansion in 2020. Organic growth will likely be positive and margin will probably increase for Payment & Merchandising Technologies. The segment will likely face lower demand from the U.S. government at Crane Currency, while acquisition of Cummins Allison might initially adversely impact margins. For Aerospace & Electronics, the company expects headwinds from stalled production of 737-MAX to impact performance.
It anticipates operating cash flow of $405-$435 million and capital expenditure of $75 million for 2020. Free cash flow is projected to be $330-$360 million.
In addition, the company anticipates the buyouts of Cummins Allison, and CIRCOR International’s Instrumentation & Sampling business to boost earnings by 15 cents per share in 2020 and by 25 cents by 2022.
Also, Crane’s proactive repositioning actions for Fluid Handling are predicted to yield savings of $10 million in 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -20.25% due to these changes.
VGM Scores
At this time, Crane has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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 this revision 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.