Crane Company (NYSE:CR) has reported robust performance in the third quarter of 2023, with core sales growth of 9% and a significant 42% increase in adjusted operating profit. Despite ongoing supply chain challenges, the company has raised its adjusted EPS guidance range to $4.05 to $4.20 and remains confident in its outlook for 2023 and beyond. According to InvestingPro data, the company's market cap stands at an impressive 5360M USD, with a P/E ratio of 17.5, indicating a healthy valuation.
Key takeaways from the earnings call:
- Crane Company announced the successful acquisition of Baum Lined Piping Gmbh, which aligns well with its existing operations. The acquisition is expected to contribute positively to margins within a few years. This aligns with InvestingPro Tips suggesting that the company yields a high return on invested capital.
- The company highlighted success stories in its Aerospace & Electronics and Process Flow Technologies segments, including securing contracts in the electric vertical takeoff and landing space and making progress in its hydrogen initiative.
- Despite supply chain challenges, particularly regarding the availability and experience levels of raw materials, components, and labor, Crane Co. managed to raise its full-year 2023 core sales outlook to 16% and maintained its full-year revised margin target of 20.3%. This displays the company's ability to operate with a moderate level of debt, as suggested by InvestingPro Tips.
- Looking ahead to 2024, the company expects sales to increase above its long-term forecast of 7% to 9% and anticipates operating leverage in the range of 35% to 40%.
- Crane Co. reported adjusted free cash flow of $82 million in the third quarter and has substantial financial flexibility for future acquisitions, which is supported by the InvestingPro data showing the company's revenue growth at 19.4%.
During the earnings call, CEO Max Mitchell discussed the challenges the company faces in expediting orders and ensuring customer satisfaction, estimating that it currently costs around $65-70 million to address these inefficiencies. Mitchell also mentioned that the aftermarket segment is expected to remain strong in 2024, although not as strong as this year. He mentioned that original equipment (OE) manufacturers would increase their pace relative to 2023, potentially resulting in a slight negative impact on the aftermarket.
Significant revenue contributions from recent program wins are expected to begin in 2025. Mitchell also addressed the recent acquisition of BAM, which enhances Crane's position in the line piping market, estimated to be worth around $1.4 billion, with the fluoropolymer segment accounting for approximately $300 million.
Despite global uncertainties, Mitchell emphasized Crane's focus on what it can control and its commitment to philanthropy and volunteerism. The CEO highlighted the positive outlook for Crane, and the company's focus on overcoming challenges and seizing opportunities. With a market size for line pipe approximately $1.4 billion, and the fluoropolymer space around $300 million, the company, listed as NYSE:CR, is well-positioned to compete globally. The InvestingPro Tips offer further insights, and you can find more details here.
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