Crane Company (NYSE:CR) Q2: Strong Sales

Crane Company (NYSE:CR) Q2: Strong Sales

Industrial conglomerate Crane Company (NYSE:CR) beat analysts’ expectations in Q2 CY2024, with revenue up 14.1% year-over-year to $581.2 million. It posted non-GAAP earnings of $1.30 per share, improving on its earnings of $1.10 per share in the same quarter last year.

Is now the time to buy Crane Company? Find out in our full research report.

Crane Company (CR) Second Quarter 2024 Calendar Year Highlights:

• Revenue: US$581.2 million vs. analyst estimates of US$559.2 million (3.9% beat)

• EPS (non-GAAP): $1.30 vs. analyst estimates of $1.22 (6.8% beat)

• Increased full-year guidance for revenue and EPS (non-GAAP)

• Gross Margin (GAAP): 38.5%, down from 39.5% in the same quarter last year

• Free cash flow of US$54.6 million is higher than the US$-89 million in the previous quarter

• Organic Recipe increased by 9% year-on-year (5% in the same quarter last year)

• Market capitalization: US$ 9.08 billion

Max Mitchell, Crane Chairman, President and CEO, stated, “Our Crane team delivered 18% adjusted EPS growth in the quarter, driven by 9% core sales growth and solid core operating leverage of 40%. Our results in the quarter reflect the benefits of our strategic investments in growth and commercial excellence, which continue to deliver value for our customers and drive above-market core sales growth in Aerospace & Electronics and Process Flow Technologies.”

Headquartered in Connecticut, Crane Company (NYSE:CR) is a diversified manufacturer of engineered industrial products, including fluid handling and aerospace technologies.

General Industrial Machinery

Automation that increases efficiency and connected equipment that collects analyzeable data have been trending, creating new demand for general industrial machinery companies. Those that innovate and create digitalized solutions can stimulate sales and accelerate replacement cycles, but all general industrial machinery companies are still at the mercy of economic cycles. Consumer spending and interest rates, for example, can greatly impact industrial production that drives demand for these companies’ offerings.

Sales growth

Reviewing a company’s long-term performance can reveal insights into its business quality. Any company can be successful in the short term, but a top-tier company tends to sustain growth for years. Crane Company has struggled to generate demand over the past five years, with its sales declining 8.1% annually, a rough starting point for our analysis.

Crane Company Total Revenue

Long-term growth is most important, but within industrial sectors, a half-decade historical view can miss new industry trends or demand cycles. Crane Company’s recent track record shows that its demand has remained suppressed, as its revenue has declined 11% annually over the past two years.

The story continues

We can dig deeper into the company’s sales dynamics by looking at its organic revenue, which strips out one-time events like acquisitions and currency fluctuations because they don’t accurately reflect its fundamentals. Over the past two years, Crane Company’s organic revenue has averaged 6.7% annual growth. Since this number is better than its typical revenue growth, we can see that some mix of divestitures and foreign exchange rates dampened its core performance.

Crane Company’s Annual Revenue Organic Growth

This quarter, Crane Company reported robust year-over-year revenue growth of 14.1%, and its $581.2 million in revenue exceeded Wall Street estimates by 3.9%. Looking ahead, Wall Street expects sales to grow 7.1% over the next 12 months, a slowdown from this quarter.

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Operating margin

Crane Company has done a decent job managing its expenses over the past five years. The company has produced an average operating margin of 9.6%, higher than the broader industrial sector.

Looking at the trend of its profitability, Crane Company’s annual operating margin has increased by 11.9 percentage points in the past five years, showing that its efficiency has improved significantly.

Crane Company Operating Margin (GAAP)

This quarter, Crane Company generated an operating profit margin of 16.6%, an increase of 4.2 percentage points year-over-year. This increase was encouraging, and since the company’s operating margin increased more than its gross margin, we can infer that it has recently been more efficient with expenses such as sales, marketing, R&D, and administrative expenses.

EPS

Looking at long-term revenue trends tells us about a company’s historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth — for example, a company may inflate its sales through excessive spending on advertising and promotions.

Unfortunately for Crane Company, its EPS and revenue have declined 6.7% and 8.1% annually over the past five years. We tend to steer our readers away from companies with declining revenue and EPS, where declining profits can imply changes in secular trends and preferences. If the tide turns unexpectedly, Crane Company’s low margin of safety could leave its stock price susceptible to large declines.

Crane Company EPS (adjusted)

Just like with revenue, we also look at EPS over a shorter period to see if we’re missing a change in the business. For Crane Company, its two-year annual EPS declines of 20.3% show that its recent history was to blame for its underperformance over the past five years. These results were bad no matter how you slice the data.

In Q2, Crane Company reported EPS of $1.30, up from $1.10 in the same quarter last year. This print beat analysts’ estimates by 6.8%. Over the next 12 months, Wall Street expects Crane Company to grow its earnings. Analysts are projecting its EPS of $4.45 last year to rise 20.5% to $5.36.

Key Takeaways from Crane Company’s Second Quarter Results

We were impressed with how significantly Crane Company beat analysts’ revenue expectations this quarter. We were also pleased that its organic revenue beat Wall Street estimates. The fact that the company beat its full-year revenue and EPS guidance makes this a clean win and gain quarter. Looking further ahead, we think this was an impressive quarter that should please shareholders. Shares were flat at $159.50 immediately following the report.

So should you invest in Crane Company right now? When making this decision, it’s important to consider its valuation, business qualities, as well as what’s happened in the last quarter. We cover this in our full, actionable research report, which you can read here, it’s free.

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