Crane Co Q3 FY2024 earnings call

• Crane had an excellent Q3 with adjusted EPS $1.38, driven by 6% core sales growth across Aerospace & Electronics and Process Flow Technologies. Core orders up 6% and core backlog up 10%.
• Acknowledged impact of hurricanes on Marion, SC and Taiwan, but insurance will cover business interruption. Boeing strike had minimal impact in Q3, with some muted volume in Q4.
• Operational highlights include being selected by Deutsche Aircraft for proximity sensing system, ZeroAvia lube and scavenge pump contract, and gas major approving Crane valves for cryogenic applications. M&A pipeline active, with small deal expected by year-end and more in 2025. Investor meeting announced for March 6, 2025 at Fort Walton Beach site.

Aerospace & Electronics

• In Q3, sales were $239 million, up 15% y/y, with 10% core growth and 5% benefit from the Vian acquisition. Backlog was $833 million, up 23% y/y. Adjusted segment margin was 23.5%, up 410 basis points from last year. Core sales growth for 2024 is slightly better than prior 12% expectation, and margin is above prior guide.

Process Flow Technologies

• Sales were $309 million, up 16% y/y, driven by 7% core sales growth and 9% benefit from the Baum and CryoWorks acquisitions. Backlog up 3% core FX-neutral. Adjusted operating margin 21.8%, up 260 basis points. Impact from hurricanes, but insurance will offset. Engineered Materials sales down 13%, margin 12.9%.

• Raised full-year adjusted EPS guidance to $5.05-$5.20, up from prior $4.95-$5.15, reflecting 19% y/y growth at midpoint. Core growth 5%-7%, towards higher end due to Aerospace & Electronics outperformance. 5% benefit from acquisitions expected.
• M&A expected to close small deal by year-end, with further transactions in 2025.

• Impact of hurricanes on Marion, SC and Taiwan sites, causing downtime and sales loss. Boeing strike impact on volumes. Potential economic shocks, war, or viruses affecting operations.

Q: Matt Summerville asked about the impact of the Boeing strike in Q3 and Q4 and details on PFT end markets.

A: Rich Maue said Boeing strike impact in Q3 was not material, and in Q4, there was some muted volume but not affecting the guide. Rich Maue provided color on PFT end markets being consistent with prior, with projects in Americas, Middle East, Asia in chemicals and pharmaceuticals, and North American water/wastewater winning share.

Q: Justin Ages asked about M&A on PFT side and election impact.

A: Max Mitchell said there's a $20 million range M&A in cryogenic space on PFT side, on schedule to close Friday. On election impact, Max Mitchell said Crane is ready to react to any administration, with flexibility and response being a hallmark.

Q: Scott Deuschle asked about Crane's performance through challenges and dollar shipset content on AT1000 nuclear reactor.

A: Max Mitchell talked about Crane Business System and operational prowess around Lean and Six Sigma, differentiating Crane. On AT1000, Crane has a couple of million dollars in shipset content, actively bidding and working with nuclear reactor builders.

Q: Damian Karas asked about nuclear activity and Aero contract discussions.

A: Max Mitchell said nuclear resurgence is exciting, with Crane's nuclear team investing in growth. On Aero, contract discussions are ongoing, and Crane has high confidence entering 2025 despite external factors.

Q: Ron Epstein asked about Boeing strike line in the sand.

A: Max Mitchell said Crane is managing Boeing strike well, with aftermarket strong and protecting volumes, no red line for Crane.

Q: Adam Farley asked about PFT margin drivers and 80-20 deployment.

A: Rich Maue said PFT margin drivers include price/cost, productivity, and operating leverage. Max Mitchell explained 80-20 is a holistic approach focusing on simplification, cost out, and serving core customers, still early innings but beneficial.

Q: Jeff Sprague asked about Honeywell delays, storm impacts, and Boeing strike color.

A: Max Mitchell said no major shifts from Honeywell delays. Rich Maue quantified storm impacts as $0.03 in Q3 PFT and $0.05-$0.10 in Q4. Max Mitchell said Boeing strike impact is managed well with proactive measures.

Q: Tony Bancroft asked about long-term plan and Engineered Materials sale.

A: Rich Maue reaffirmed long-term targets for growth and margins. Max Mitchell said M&A activity is high, and Engineered Materials is not strategic, with sale expected in future cycles.