Crane Co Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Strategic Focus: Emphasized honing strategic thinking, reacting to fast-changing events, and executing in a dynamic environment, confident in emerging stronger post-adversity.
• Segment Updates: Aerospace & Electronics sees strong demand in commercial and defense, with new opportunities won (e.g., XM30 program, Bell V-280 contracts). Process Flow Technologies repositioned around core end markets (chemical, pharmaceuticals, etc.), investing in growth and active in M&A with a $1.5 billion M&A capacity.
• Tariff Exposure: About 7-8% of COGS from direct US imports, 3-4% from intercompany sales. Expect to offset tariff impact via price and productivity.
• Investor Day: Highlighted advanced high power conversion technologies at Fort Walton Beach facility for defense applications.
• Senior Leadership Conference: Focus on growth, commercial execution, strategy development, and sharing best practices across the company.

Segment Performance

• Aerospace & Electronics: Generated sales of $249 million in the quarter, a 10% increase with all growth organic. Record backlog reached $960 million, up 21% year-over-year and 11% sequentially. Adjusted segment margin was 26%, a record high, up 360 basis points from the prior year. Core sales growth for the year is expected to be mid to high-single digits.
• Process Flow Technologies: Achieved sales of $309 million, up 9% in the quarter. Driven by 5% core sales growth and a 5% benefit from the CryoWorks and Technifab acquisitions, offset by unfavorable foreign exchange. Core FX-neutral backlog decreased 6% year-over-year, while core FX neutral orders increased 2% year-over-year and 10% sequentially. The segment anticipates positive core growth sales for the year.

Guidance

• Reaffirmed full-year 2025 adjusted EPS outlook in the range of $5.30 to $5.60, based on current economic conditions. Assumptions include tariffs continuing throughout the balance of the year. Will adjust outlook if trade policy or demand changes occur.

Risks

• Tariff impacts on COGS if not mitigated.
• Supply chain disruptions potentially affecting deliveries and projects.
• Economic uncertainties impacting demand in certain regions, particularly in chemical markets.

Question and Answer

Q: Clarity on updated guidance and price contribution A: Price expected to offset majority of tariff impact, around 3% overall, more in Process Flow Technologies. Backlog growth is broad-based, including multiyear orders in defense.

Q: Defense program growth drivers A: Munitions replenishment, aging military upgrades, electrification are key themes driving growth in defense programs.

Q: Growth split in Aerospace & Electronics A: Roughly 50-50 between volume and price growth in the quarter.

Q: COMAC and tariffs A: COMAC is still taking deliveries for C919, on track with ramp-up, and aftermarket is strong.

Q: Supply chain risk A: Process Flow Technologies supply chain is stable; Aerospace & Electronics is seeing slight lead time extensions but no major disruption.

Q: M&A activity A: Active in M&A, traveling for due diligence on multiple acquisitions, hopeful for announcements in 2025