Yahoo Finance Crane Company's (NYSE:CR) Q2: Strong Sales
Industrial conglomerate Crane Company (NYSE:CR) beat analysts' expectations in Q2 CY2024, with revenue up 14.1% year on year to $581.2 million. It made a non-GAAP profit of $1.30 per share, improving from its profit 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) Q2 CY2024 Highlights:
Revenue: $581.2 million vs analyst estimates of $559.2 million (3.9% beat)
EPS (non-GAAP): $1.30 vs analyst estimates of $1.22 (6.8% beat)
Raised 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 $54.6 million is up from -$89 million in the previous quarter
Organic Revenue rose 9% year on year (5% in the same quarter last year)
Market Capitalization: $9.08 billion
Max Mitchell, Crane's Chairman, President and Chief Executive Officer, 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 benefits from our strategic investments in growth and commercial excellence, which continue to add value for our customers and drive above market core sales growth across both Aerospace & Electronics and Process Flow Technologies."
Based 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 analyzable data have been trending, creating new demand for general industrial machinery companies. Those who innovate and create digitized solutions can spur sales and speed up replacement cycles, but all general industrial machinery companies are still at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the 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 business can have short-term success, but a top-tier one tends to sustain growth for years. Crane Company struggled to generate demand over the last five years as its sales dropped by 8.1% annually, a rough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Crane Company's recent history shows its demand has stayed suppressed as its revenue has declined by 11% annually over the last two years.
We can dig further into the company's sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations because they don't accurately reflect its fundamentals. Over the last two years, Crane Company's organic revenue averaged 6.7% year-on-year growth. Because this number is better than its normal revenue growth, we can see that some mixture of divestitures and foreign exchange rates dampened its headline performance.
This quarter, Crane Company reported robust year-on-year revenue growth of 14.1%, and its $581.2 million of revenue exceeded Wall Street's estimates by 3.9%. Looking ahead, Wall Street expects sales to grow 7.1% over the next 12 months, a deceleration from this quarter.
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Operating Margin
Crane Company has done a decent job managing its expenses over the last five years. The company has produced an average operating margin of 9.6%, higher than the broader industrials sector.
Looking at the trend in its profitability, Crane Company's annual operating margin rose by 11.9 percentage points over the last five years, showing its efficiency has meaningfully improved.
This quarter, Crane Company generated an operating profit margin of 16.6%, up 4.2 percentage points year on year. This increase was encouraging, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as sales, marketing, R&D, and administrative overhead.
EPS
Analyzing 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 could inflate its sales through excessive spending on advertising and promotions.
Sadly for Crane Company, its EPS and revenue declined by 6.7% and 8.1% annually over the last five years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Crane Company's low margin of safety could leave its stock price susceptible to large downswings.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Crane Company, its two-year annual EPS declines of 20.3% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.
In Q2, Crane Company reported EPS at $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 in the last year to climb by 20.5% to $5.36.
Key Takeaways from Crane Company's Q2 Results
We were impressed by how significantly Crane Company blew past analysts' revenue expectations this quarter. We were also glad its organic revenue topped Wall Street's estimates. That the company raised its full year revenue and EPS guidance makes this a clean beat and raise quarter. Zooming out, we think this was an impressive quarter that should delight shareholders. The stock remained flat at $159.50 immediately after reporting.
So should you invest in Crane Company right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
