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Crane Fundamentally Strong, ’16 View Solid: Time to Buy?


We issued an updated research report on Crane Co. CR on Nov 29, 2016. The company is recognized for its diversified product portfolio of engineered industrial products. It currently has a $2.7 billion market capitalization.

We believe Crane Co. is well positioned to leverage benefits from its diversified product portfolio, primarily including valves for industrial usage, pumps and water treatment equipments, coin accepters and dispensers, vending equipment and related solutions, critical aircraft systems and components, fiberglass-reinforced plastic panels. These products and services cater to the needs of a wide customer base in the aerospace, electronics, hydrocarbon processing, petrochemical, chemical, power generation, automated merchandising, transportation and other end-markets.

Backed by the benefits of such diversities, Crane Co. targets to achieve 10% average annual earnings per share growth over the long run. It targets long-term organic growth to be at least 2−4% for Fluid Handling, 3−5% for Payment & Merchandising Technologies, 4−5% for Aerospace & Electronics, and equal to Gross Domestic Product growth for Engineered Materials.

Rewarding shareholders handsomely through dividend payments and share buybacks remains a priority for Crane Co. In the years ahead, the company targets to achieve a total payout ratio of 40−50%. Also, the company is consistently undertaking organic and inorganic initiatives to expand its businesses. By 2016, the company is on track to realize cumulative synergistic benefits of $33 million from the acquired MEI assets (Dec 2013).

A brief snapshot of Crane Co’s financial performance in third-quarter 2016 and outlook is provided below:

In the quarter the company’s earnings of $1.07 per share exceeded the Zacks Consensus Estimate of $1.01 by 5.9%. Also, the bottom-line came in above the year-ago tally of $1.03. Net sales generated were $694.2 million, above the Zacks Consensus Estimate of $658.5 million and up 3.6% year over year on the back of core sales growth of 5.5%, partially offset by 2% adverse impact from unfavorable foreign currency movements.

For 2016, Crane Co. revised its earnings guidance to $4.12−$4.20 per share from $4.00−$4.20 expected earlier. Core sales growth is now anticipated to be 0−2% versus the earlier forecast of (1.5%)−1.5%.

Crane Co. currently carries a Zacks Rank #2 (Buy).

Other stocks worth considering in the diversified operations industry include Leucadia National Corporation LUK, Mitsubishi Corporation MSBHY and Danaher Corporation DHR. While Leucadia National and Mitsubishi Corporation sport a Zacks Rank #1 (Strong Buy), Danaher Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Leucadia National Corporation’s earnings estimates for 2016 have been revised upward in the last 60 days. Also, earnings estimates for Mitsubishi Corporation increased for fiscal 2017 and fiscal 2018.

Danaher Corporation reported better-than-expected results in the last four quarters, with a positive average earnings surprise of 6.09%. Also, earnings estimates for 2016 and 2017 have increased over the last 60 days.

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