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Crane (CR) to Benefit From Acquisitions, Headwinds Persist

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On Mar 25, we issued an updated research report on Crane Company (CR - Free Report) .

In the past three months, this Zacks Rank #3 (Hold) stock has lost 49.9%. Also, the industry has recorded a decline of 39.1%, over the same time frame.



Existing Business Scenario

Crane will likely benefit from its focus on product development, strong operating leverage, growth investments, acquired assets and repositioning initiatives in the quarters ahead. Also, the company initiated repositioning activities for Payment & Merchandising, Fluid Handling, and Aerospace & Electronics segments in the fourth quarter of 2017. The initiatives — including facility consolidations, especially in Europe and North America, and 3% reduction in the global workforce — might benefit earnings going forward. These actions, coupled with certain proactive repositioning measures, taken in the fourth quarter of 2019 for Fluid Handling might be beneficial in the quarters ahead.

Also, the company’s investment in buyouts (net of acquired cash) totaled $156.2 million in 2019. Acquired assets boosted its sales by 0.1% year over year in 2019. It is worth mentioning here that Crane acquired Cummins Allison in December 2019. The buyout has been helping it to strengthen the Crane Payment Innovations business. For 2020, the company believes that acquisitions will boost its sales by 8%.

However, for 2020, the company noted that low demand from the U.S. government at Crane Currency will affect Payment & Merchandising Technologies’ performance. Also, the segment’s margin might be impacted by the Cummins Allison buyout. For Aerospace & Electronics, it believes that issues with 737-MAX production might be dragging.

Further, high debt level remains a concern for the company. Notably, in the last three years (2017-2019), its long-term debt rose 19.4% (CAGR). Notably, the metric was $842 million at the end of the fourth quarter of 2019.

Key Picks

Some better-ranked stocks are Graco Inc. (GGG - Free Report) , Broadwind Energy, Inc. (BWEN - Free Report) and Regal Beloit Corporation (RBC - Free Report) . While Graco sports a Zacks Rank #1 (Strong Buy), Broadwind and Regal Beloit carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Graco delivered positive earnings surprise of 0.40%, on average, in the trailing four quarters.

Broadwind delivered positive earnings surprise of 10.42%, on average, in the trailing four quarters.

Regal Beloit’s positive earnings surprise in the last reported quarter is 0.81%.

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