Crane Co. (CR), a diversified machinery company, reported adjusted earnings per share of $1.04 for the fourth quarter 2013, up 13.0% year over year. Also, earnings were a cent above the Zacks Consensus Estimate.
For 2013, adjusted earnings per share were $4.18, up 13.0% year over year and a cent above the Zacks Consensus Estimate.
Crane Co’s net sales in the quarter increased 8.2% year over year to $681.4 million and also surpassed the Zacks Consensus Estimate of $655 million. The uptrend in sales can be attributed to a 4.5% core sales increase and a 4.0% contribution from acquisitions, offset partially by a 0.3% negative foreign currency translation impact.
Total order backlog in the fourth quarter was $761.7 million, down 1.5% sequentially.
Crane Co. generates revenue under four heads, the results of which are briefly discussed below.
Revenue from the Aerospace & Electronics segment increased 6.1% year over year to $186.7 million. The uptrend was driven primarily by a surge in commercial OEM and aftermarket sales in the Aerospace business and increased Power and Microwave products sales in the Electronics group.
Merchandising Systems revenue increased 30.3% to $122.6 million driven by contribution from the MEI acquisition. Also, the Payments Solutions business experienced a sales hike in the quarter.
Engineered Materials revenue came in at $52.4 million, up 11.7% year over year. The increase was the result of higher sales to recreational vehicle equipment manufacturers.
Fluid Handling revenue was $319.7 million, up 2.3% due to sales growth in process valves, offset partially by lower commercial valve sales in Canada.
In 2013, Crane Co generated revenue of $2,595.3 million, up 0.6% year over year and above the Zacks Consensus Estimate of $2,586.0 million.
Crane Co’s cost of goods sold in the fourth quarter 2013 increased 8.9% year over year and, as a percentage of revenue, was 66.7%, up 40 basis points year over year. Gross margin in the quarter was 33.3%. SG&A expenses, as a percentage of revenue, was 21.1%, against 20.9% in the year-ago quarter.
Adjusted operating margin from continuing operations expanded 100 basis points year over year to 14.4% in the quarter. Adjusted EBITDA was $120.9 million versus $102.0 million in the year-ago quarter while margin in the quarter stood at 17.7%.
Balance Sheet/Cash Flow
Exiting the fourth quarter of 2013, cash and cash equivalents of Crane Co. were $270.6 million versus $403.4 million in the previous quarter. Long-term debt increased substantially to $744.7 million from $199.2 million in the previous quarter. The increase was primarily due to the MEI acquisition.
Crane Co’s cash flow from operating activities slipped 4.5% year over year to $148.4 million. Capital spending in the quarter was $10.4 million versus $9.4 million in the year-ago quarter. In the fourth quarter 2013, the company paid dividends totaling $17.5 million while roughly $67.3 million were paid in 2013.
Also, along with the results, Crane Co. announced that a quarterly dividend of 30 cents will be paid on Mar 10, 2014, to shareholders of record as on Feb 28, 2014.
For 2014, Crane Co. anticipates adjusted earnings per share in the $4.55–$4.75 range. Sales are predicted to be roughly $3.0 billion, including the impact of the MEI acquisition and core sales growth of 1%–3%. Including one-time items, GAAP earnings per share are estimated in a band of $4.28–$4.48.
Free cash flow is anticipated to be within $225–$250 million.
Crane Co. currently has a market capitalization of $3.8 billion. The stock currently holds a Zacks Rank #2 (Buy). Other companies to look out for are Carlisle Companies Incorporated (CSL), Icahn Enterprises, L.P. (IEP) and Hutchison Whampoa Limited (HUWHY). All these companies carry the same Zacks Rank as Crane Co.
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