Crane Holdings Co. (CR) on Q1 2021 Results - Earnings Call Transcript

Operator: Hello, and welcome to the Crane Co. First Quarter 2021 Earnings Call. . As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Jason Feldman. Please go ahead. Jason Feldman: Thank you, operator, and good day, everyone. Welcome to our first quarter 2021 earnings release conference call. I'm Jason Feldman, Vice President of Investor Relations. On our call this morning, we have Max Mitchell, our President and Chief Executive Officer; and Rich Maue, our Senior Vice President and Chief Financial Officer. We'll start off our call with a few prepared remarks, after which we will respond to questions. Just a reminder that the comments we make on this call may include some forward-looking statements. We refer you to the cautionary language at the bottom of our earnings release and also in our annual report, 10-K and subsequent filings pertaining to forward-looking statements. Also during the call, we will be using some non-GAAP numbers, which are reconciled to the comparable GAAP numbers and tables at the end of our press release and the accompanying slide presentation, both of which are available on our website at www.craneco.com in the Investor Relations section. Please also mark your calendars for our May 26 Virtual Aerospace & Electronics Investor Day. Max Mitchell: Thank you, Jason. Well, what a solid quarter on so many levels. I told you all that our February Investor Day that Crane was at an inflection point for accelerating growth after years of organic investments. In the first quarter, you saw substantial evidence of that inflection and the related themes from Investor Day reading through. We are well positioned for accelerating organic growth as our end markets continue to recover. In addition, we are outgrowing our end markets because of our consistent and ongoing investment in technology, new product development, and commercial excellence. Solid execution continues to leverage that growth into earnings and strong free cash generation, which creates substantial flexibility for capital deployment, and continued evidence of the value we create through acquisitions with stellar performance at Crane Currency, Cummins Allison and I&S. As we announced last night, first quarter adjusted EPS was $1.66, a 44% increase from the prior year. All 3 of our strategic global growth platforms performed better than we forecast, led by Crane Currency and with demand ahead of expectations across all businesses, most substantially at Fluid Handling. In addition to market growth, the outperformance was driven by extremely strong fundamental execution at all levels across the business, from productivity, price actions, growth initiatives driving market outgrowth and new product development, all driven by our rigorous cadence and disciplined approach to managing our business. Regarding market outgrowth, we will spend dedicated time on Aerospace & Electronics at our May 26 Investor Day, but I would like to highlight a handful of notable accomplishments this quarter in our other businesses. At Fluid Handling, starting with our water and wastewater business. We continue to make progress with the new products that Alex discussed in February. Our new high-efficiency non-clog pump remains on track to launch in July. And we are already seeing significant interest in the product with substantial momentum in quoting activity. When launched, this will be the most efficient pump in the market with the proprietary cooling system that allows the motor operate with far less resistance, improving efficiency. Our chopper pump introduced in 2018 has been proven to reduce maintenance costs by 75%. A little over 2 years after launch, we continued to gain share, and we just had our best-ever sales month for this product in March. Together, these 2 products are on track to drive $30 million of incremental sales by 2025. Richard Maue: Thank you, Max, and good morning, everyone. As usual, I'll be providing segment comments that will compare the first quarter of 2021 to 2020, excluding special items, as outlined in our press release and slide presentation. Operator: . Our first question today is coming from Matt Summerville from D.A. Davidson. Matt Summerville: A couple of questions. First, within the currency side of the business, up 50% plus year-over-year, clearly a big first quarter. It sounds like a portion of that is international, a portion of that is domestic. Maybe if you could sort of talk about that a little bit and maybe parse that out? And then how should we be thinking about the balance of the year, specifically as it relates to that business? And I guess, what I'm trying to get at is how much of this growth do you think is sort of pandemic-driven, which we would think would be somewhat temporary versus more secularly driven? I know there's a lot there, but thank you. Max Mitchell: Yes, sure. So on the quarter itself, yes, 52% overall for currency. Recall that last year, in the first quarter, was a very easy comp, I would say, relative to this quarter given the destocking that was occurring and we had not yet began the production on the revised with the U.S. government. So clearly, a component of that -- a substantial component of that 52% coming from that part of the business. But I don't want to undersell the significance of the continued momentum that we're seeing on the international side, Matt, it's been pretty exceptional, and we have continued to see that continue. I think I mentioned on our last call, where we had seen in 2020 alone, about -- I think it was close to 40% year-over-year growth in 2020 versus the prior year on international. And looking at our numbers, this year, we're going to be up in the double-digit range again here in 2021. So that gives you a sense, a little bit about the split between the contribution of the 52%. We're not going to break it out in detail, though, between the two. Richard Maue: Correct. Max Mitchell: And just to continue on what Rich is saying, Matt, so if I normalize, we had the adjustment for U.S. -- U.S. versus international. When you look at it longer term, we expected it to come back between $6.5 billion to $7 billion. That's my estimate -- our estimates. We're at $7.6 billion to $8 billion to $9.6 billion, and we're running at the low end of that. That's going to continue at least another year for sure. I feel -- my estimate, not anything we're getting from our customer. So you can determine what's COVID related in that $6.5 billion to $7 billion versus the $7.6 billion, which is at the low end. On international, the majority of it is -- I would argue, is a secular trends of -- let me correct. On international, the bulk of it is share gain in our execution versus COVID-related and any short-term bump. There's some of that, but the bulk of it is us continuing to win new customers, execute, tie in our technology, design capabilities. All in, I think we're just executing really, really well. Hopefully that helps. Richard Maue: I'll just add one other thing, Matt, if I can. On COVID, as it relates to international, in many cases, projects were actually delayed because of COVID, in terms of new designs and upgrades and the like during the pandemic. So we've actually invested more on design personnel and so forth to address what we see as some pent-up demand on projects kicking back in again. Matt Summerville: Great. That's helpful. And then maybe just one on Fluid Handling. Can you talk about what you're seeing in terms of price realization year-over-year, whether you need to go get more price in that business to help offset inflation? And how -- what kind of relative spread do you think you'll be able to maintain between price and cost in that business? Richard Maue: Yes. So we feel really good about our price actions. There's really nothing to go get, I would say. We're going to monitor things closely as we move forward. But all of our pricing actions are in place, and we feel really good about that spread. It's not a -- I would say, it's not neutral. We're doing our best to make sure that we're getting that price cost to be accretive, which so far, so good, and we expect that to continue as we go through the balance of the year. Operator: The next question is coming from Nathan Jones from Stifel. Adam Farley: This is Adam Farley on for Nathan. Congrats on the quarter. Going back to Fluid Handling, what was the cadence of orders through the quarter? Did March strengthened better than normal seasonality? And how orders trended through April? Richard Maue: Yes. What I would say is that things strengthened through the quarter. As I said in my prepared remarks, on the commercial side, it was the strongest and it was sustained through the quarter. And on the process side, we saw it build through the quarter. So we do expect that momentum actually to continue here as we move through the second quarter. So a very strong month of March, in particular on process and again, sustained good momentum in the commercial side of the business. Adam Farley: Okay. And then following up on that, did you see any benefit or delay from weather related to Fluid Handling? And could you quantify that? Richard Maue: Yes. No, we did not. We didn't see any of that, weather was -- I think you're referring to the storms in Texas. We did not see really any inflection of any sort related to that. Operator: Our next question today is coming from Damian Karas from UBS. Damian Karas: So I wanted to ask you on the Fluid Handling 6% organic growth, obviously, better than you had expected, and you talked a little bit about the short-cycle process strength exiting the quarter. I was wondering if you can maybe just give a better sense on how much of that 1Q was catch-up demand or restocking activity? And Max, you had highlighted all the product development opportunity in Fluid Handling. Any sense on how much share gains contributed to the first quarter? Max Mitchell: Yes, good questions. I don't have a hard on share gain... Richard Maue: Yes. So maybe on the restocking, I would say we think there might have been a little bit of that, Damian, but not a lot. And frankly, in pulling some of our channel partners in the U.S. who I think wanted to do that, they couldn't, given the demand that was actually the underlying demand that was actually there. So I think this is really all demand-driven right now and not a whole heck of a lot. I did mention, I think that there has -- we're attributing some of it, but it's not significant in the quarter. From a share gain perspective... Max Mitchell: I would say that, I think that, from what we're seeing, Damian, there should be some restocking coming But right now, it seems to be all flowing through. It's occurring so quickly that our channels are -- the orders that we see in, the uptick, are going immediately to end customers. Richard Maue: Yes. And on share, I would say that if -- we're outgrowing the market. I don't have a specific number for you on the first quarter for that, but we are definitely outgrowing the market given all the initiatives that we've been driving here. Max Mitchell: We'll take a look at the number and see, we can get back to you. Damian Karas: Okay. Okay. Got it. And then I just wanted to ask you about the PMT margins. How should we think about the cadence for the rest of the year there? Obviously, U.S. currency is kind of positive for your mix right now, but you still have CPI declining, and I'm assuming that kind of mix up when you get later in the year. So what's the cadence look like for margins in PMT? Richard Maue: Yes. We should still see pretty decent margins. I think the full year, we said we were going to exceed overall our 20% roughly, given the 25 here in the quarter. Obviously, we still expect some pretty solid margins. Second quarter will still be, I think, very healthy, and it will probably come off a bit from that point just given the project timing mainly in currency. But on the Payment Innovation side, we're going to start to see this demand come back as we've already started to see. So we do expect that piece of the business to increase. But the lumpiness associated with currency is going to cause us to see some margin coming back in the latter half of the year. Operator: We've reached end of our question-and-answer session. I'd like to turn the floor back over to management for any further closing comments. Max Mitchell: Inflection and growing momentum, consistency of execution, our strong results this quarter support all of our key themes we discussed in February. We're in the very early stages of a strong market recovery. We have invested heavily in our organic growth initiatives and results are reading through and consistent above-market sales growth. We have growing opportunities for acquisitions in Fluid Handling and Aerospace & Electronics building on our core competencies, and we have an incredibly strong foundation to build upon grounded in the Crane business system and a culture of ethics and integrity. As the late great Hank Aaron once said, consistency is what counts. You have to be able to do things over and over again. That's the essence of the Crane culture, and the Crane Business system, consistent strategic execution and repeatable processes to ensure success paired with driving for continuous improvement in a disciplined approach. One last reminder to encourage all of you to join our May 26, Aerospace & Electronics Investor Day virtually where we will provide additional details and progress on our strategic growth initiatives and share some very exciting technology advancements with you on that day. Thank you for your interest in Crane. Have a great day. Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.
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Crane Company (NYSE:CR) Shows Promising Growth and Analyst Optimism

  • The consensus price target for Crane Company (NYSE:CR) has increased by approximately $10.25, indicating analyst optimism.
  • Crane reported a 7% growth in sales and a 12% increase in its annual dividend, highlighting its strong financial performance.
  • Despite a lower price target from UBS, Crane's strategic focus and expected earnings growth of over 14% annually through 2027 suggest significant growth potential.

Crane Company (NYSE:CR) is a diversified industrial company operating in sectors such as Aerospace & Electronics, Process Flow Technologies, Payment & Merchandising Technologies, and Engineered Materials. This diversification allows Crane to serve a wide range of industries globally, contributing to the positive sentiment among analysts. The consensus price target for Crane has shown an upward trend, reflecting increased optimism about its future growth and profitability.

Over the past year, the average price target for Crane has increased by approximately $10.25, from $175.75 to $186. This suggests that analysts have become more optimistic about the company's performance. The stability in the price target over the last quarter and month indicates a consistent outlook among analysts, which could be a positive signal for investors.

Crane's recent financial performance supports this optimism. The company reported a 7% growth in sales for the year ending December 31, 2024, with a GAAP EPS of $3.19 and an adjusted EPS of $4.26. Additionally, Crane has announced a 12% increase in its annual dividend, following the divestiture of its Engineered Materials segment. This move is expected to streamline operations and focus on core business areas.

Despite UBS setting a lower price target of $125 for Crane, the company's strategic emphasis on Aerospace & Electronics and Process Flow Technologies, along with successful acquisitions, is expected to drive earnings growth by over 14% annually through 2027. Crane's technological differentiation and robust financial performance provide it with a competitive advantage in highly competitive markets.

Crane's management has set ambitious targets, aiming for significant revenue and EBITDA growth by 2028. The company's current valuation suggests it is fairly priced, yet it holds market-beating potential, making it an attractive option for value investors seeking growth opportunities. The upcoming earnings release on April 28, 2025, will provide further insights into Crane's financial health and future prospects.