We issued an updated research report on Crane Co. CR on Nov 30, 2015. The company manufactures and sells a diverse range of engineered industrial products in North and South America, Europe, the Middle East, Asia and Australia.
The most striking feature of Crane Co. is its large customer base in end markets such as aerospace, electronics, hydrocarbon processing, petrochemical, chemical, power generation, automated merchandising, transportation and others. Such diversity mitigates, to a large extent, the adverse effect of customer concentration risks.
In addition, Crane Co. is keen on acquiring meaningful assets, disposing non-performing businesses as well as undergoing internal mergers to further improve its business portfolio. Backed by these positives, the company targets to achieve 10% average annual earnings per share growth in the long run. Free cash flow conversion is anticipated to be 100% or more of net income.
However, risks from foreign currency translation, stiff competition and uncertain global economic conditions might restrict Crane Co’s momentum in the near term. For 2015, the company has narrowed its earnings guidance to $4.10−$4.20 per share from the previous projection of $4.10−$4.30. Core sales will be down roughly 1% compared with the prior outlook of down 1% to up 1%.
To add to the woes, Crane Co. has to comply with various governmental regulations on the domestic front, especially in Aerospace & Electronics, and Fluid Handling segments. Any failure in meeting the requirements can lead to penalties, hurting the company’s profitability. Also, difficulties or delays in research and development or production and services, apart from failure of new products and technologies in the market, may damage the company’s competitive position.
Crane Co, with a market capitalization of $3 billion, currently carries a Zacks Rank #3 (Hold). On the other hand, some companies in the same sector are performing well, having gained high Zacks investment rankings. These stocks include Encore Wire Corp. WIRE, iRobot Corporation IRBT and John Bean Technologies Corporation JBT. While Encore Wire sports a Zacks Rank #1 (Strong Buy), both iRobot Corporation and John Bean Technologies carry a Zacks Rank #2 (Buy).
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