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Crane (CR) Poised for Growth Despite Macroeconomic Risks


On Nov 30, 2016, Zacks Investment Research downgraded renowned diversified operations company Crane Co. CR to a Zacks Rank #3 (Hold) from a Zacks Rank #2 (Buy). Going by the Zacks model, companies with a Zacks Rank #3 have strong chances of performing in line with the broader market.

Why on Hold?

Crane Co.’s business is currently encircled a number of bullish and bearish aspects.

Following the third-quarter 2016 release (Oct 24, 2016), Crane Co. shares recorded an average return of 21.43%, which outperformed the average Zacks-categorized Diversified Operations industry return of 5.63%. The company is poised for long-term growth on the back of a large client base and diversified product portfolio. Also, new acquisitions, higher demand from Fluid Handling as well as Payment & Merchandising customers are expected boost near-term sales and profitability.

Based on these positives, Crane Co. revised its full-year 2016 adjusted earnings guidance range to $4.12–$4.20 per share from $4.00–$4.20 expected earlier. Free cash flow is now anticipated in the $200–$225 million range as against $195–$220 million expected earlier. A greater cash flow will enable the company to return more to its shareholders. Over the long term, Crane Co. targets total payout ratio of 40–50%.

However, we note that the benefits from the aforesaid aspects might be partially offset by certain headwinds. Crane Co. expects normal seasonality to hamper engineered materials and merchandising systems businesses, while less favorable mix is likely to impact fluid handling business in the fourth quarter.

The company's geographical diversification exposes it to adverse currency movements as well as adverse trade regulations and uncertain economic conditions in the foreign markets it serves. Also, intense competition exposes the company to risks of market share loss.

Over the last seven days, the Zacks Consensus Estimate for the stock is pegged at $4.18 per share for 2016 and $4.43 per share for 2017, reflecting brokers’ neutral stance.

CRANE CO Price and Consensus

CRANE CO Price and Consensus | CRANE CO Quote

Stocks to Consider

Some better-ranked stocks in the industry are Leucadia National Corp. LUK, Danaher Corp. DHR and Hudson Technologies Inc. HDSN.

Leucadia National Corporation delivered an average positive earnings surprise of 178.96% in the trailing four quarters. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Danaher Corporation currently carries a Zacks Rank #2 (Buy). It posted an average positive earnings surprise of 6.09% in the trailing four quarters.

Hudson Technologies Inc. currently carries a Zacks Rank #2. The company delivered an average positive earnings surprise of 20.71% in the trailing four quarters.

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