Crane Co. (CR) reported its third-quarter 2014 earnings after the market closed on Oct 27 .The results fell short of expectations due to lower core sales growth in its Fluid Handling business segment.
Crane reported adjusted earnings per share of $1.12, up 7.7% year over year but lagging the Zacks Consensus Estimate of $1.17.
Revenues: The company generated net sales of $727.4 million, reflecting an increase of 14.1% year over year. The improvement was attributable to 13.5% contribution from inorganic growth and 0.3% each from core sales and foreign currency translation impact. However, reported net sales lagged the Zacks Consensus Estimate of $761 million.
At quarter-end, total order backlog was $827.6 million, down 3% year over year.
Revenues generated from the Aerospace & Electronics segment were $167.2 million, down 1.5% year over year. Order backlog was $404.8 million, up 2% sequentially.
The Payment & Merchandising Systems segment’s revenues came in at $181.1 million, soaring 116.5% year over year. Order backlog was $58.8 million, down 15.8% sequentially.
The Engineered Materials segment reported revenues of $64.7 million, increasing 4.5% year over year. The segment’s order backlog, recording a sequential decrease of 15.3%, settled at $14.4 million.
Revenues from the Fluid Handling segment decreased 2.4% year over year to $314.5 million. Order backlog was $349.6 million, down 5.4% sequentially.
Margins: Crane’s cost of goods sold increased 13% year over year to and stood at 65.4%, as a percentage of revenue, versus 66% in the prior-year quarter. Selling, general and administrative (SG&A) expenses, as a percentage of revenue, were 19.8% as against 20% in the year-ago quarter.
Adjusted operating margin from continuing operations increased 50 bps year over year to 14.9%.
Balance Sheet/Cash Flow: Exiting third-quarter 2014, Crane had cash and cash equivalents of $301.7 million, up compared with $270.6 million at year-end 2013. Long-term debt remained stable at $749.2 million.
The company generated cash of $68.2 million from its operating activities, down from $80.5 million generated in the year-ago quarter. Capital expenditure jumped 64.2% to $11.5 million. Cash dividends paid totaled $19.5 million, up from $17.4 million in the comparable prior-year quarter.
Concurrent with its earnings release, Crane announced that its board of directors has approved a quarterly dividend of 33 cents per share. The dividend will be paid on Dec 9 to shareholders of record as on Nov 28.
Outlook: For 2014, Crane reduced its earnings per share guidance to a range of $4.40–$4.50 from the previous projection of $4.55–$4.75. Management anticipates sales of $2.95 billion for the year, compared with the previous guidance of $3.0 billion. According to the revised guidance, the company expects 0% to 1% growth in core sales. The free cash flow of the company is expected within $200–$230 million for full-year 2014. The company has missed its third quarter earnings estimates probably due to low core sales growth, resulting from anticipated fall in demand.
With a market capitalization of $3.61 billion, Crane currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Carlisle Companies Incorporated (CSL), CLARCOR Inc. (CLC) and Compass Diversified Holdings (CODI). While Carlisle Companies sports a Zacks Rank #1 (Strong Buy), both CLARCOR and Compass Diversified Holdings carry a Zacks Rank #2 (Buy).
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