Crane Co. – Value Analysis (NYSE:CR) : December 8, 2017

Capitalcube gives Crane Co. a score of 47.

Our analysis is based on comparing Crane Co. with the following peers – Sun Hydraulics Corporation, Parker-Hannifin Corporation, Actuant Corporation Class A, Park-Ohio Holdings Corp., Omega Flex, Inc., L3 Technologies, Inc., IMI plc Sponsored ADR, Rockwell Collins, Inc. and NCR Corporation (SNHY-US, PH-US, ATU-US, PKOH-US, OFLX-US, LLL-US, IMIAY-US, COL-US and NCR-US).

Investment Outlook

Crane Co. has a fundamental score of 47 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • From a peer analysis angle, relative underperformance over the last year has improved more recently.
  • It’s current Price/Book of 3.70 is about median in its peer group.
  • The market expects faster earnings growth from CR-US than from its peers and also a turnaround in its current ROE.
  • CR-US has relatively low profit margins and median asset efficiency.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • Over the last five years, CR-US‘s return on assets has declined from about median to less than the median among its peers suggesting that the company’s historical competitiveness in operations is slipping away.
  • Company appears to give away relatively high gross margins to relatively high operating costs suggesting a differentiated product portfolio with low pre-tax margins relative to peers.
  • Compared with the peers chosen, CR-US has had faster revenue growth in prior years and a current P/E ratio that suggests faster growth in the future suggesting superior growth expectations.
  • The company’s capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • CR-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

CR-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 15.13% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 18.05%), and a well-cushioned interest coverage level of 11.44x, CR-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 9 chosen peers for the company, only 8 of the stocks have an outstanding debt balance. Companies with no debt include OFLX-US.

CR-US has maintained its Quick & Able profile from the recent year-end.

  • CR-US‘s interest coverage is upward trending and is now similar to its five-year average interest coverage of 11.35x.
  • Though its interest coverage increased to 11.44x from 10.90x (in 2016), its peer median remained relatively stable during this period at 7.98x.
  • Interest coverage rose 0.69 points relative to peers.
  • CR-US‘s debt-EV is its lowest relative to the last five years and compares to a high of 24.76% in 2015.
  • The decrease in its debt-EV to 15.13% from 16.56% (in 2016) was also accompanied by a decrease in its peer median during this period to 18.05% from 19.47%.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Sun Hydraulics Corporation 12.33 2.62 18.14 53.36
Parker-Hannifin Corporation 20.98 1.44 8.59 25.07
Actuant Corporation Class A N/A 1.71 2.39 16.82
Park-Ohio Holdings Corp. 49.78 2.36 2.68 15.72
Omega Flex, Inc. 0 3.54 No interest exp 999
L3 Technologies, Inc. 22.56 1.8 6.81 35.23
IMI plc Sponsored ADR 11.65 1.19 10.39 61.81
Rockwell Collins, Inc. N/A 1.55 7.38 25.09
NCR Corporation 39.56 1.42 4.12 23.23
Crane Co. 15.13 2.66 11.44 49.56
Peer Median 18.05 1.75 7.98 30.16
Best In Class 11.65 3.54 No interest exp 999

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Company Profile

Crane Co. engages in the manufacture of engineered industrial products. It operates through the following business segments: Fluid Handling, Payment & Merchandising Technologies, Aerospace & Electronics, and Engineered Materials. The Fluid Handling segment provides highly engineered fluid handling equipment for critical performance applications that require high reliability. The Payment & Merchandising Technologies segment comprises of Crane Payment Innovations and Merchandising Systems. The Aerospace & Electronics segment supplies critical components and systems, including original equipment and aftermarket parts, primarily for the commercial aerospace and military aerospace and defense markets. The Engineered Materials segment manufactures fiberglass-reinforced plastic panels and coils, primarily for use in the manufacturing of recreational vehicles, truck bodies, truck trailers, with additional applications in commercial and industrial buildings. The company was founded by Richard Teller Crane on July 5, 1855 and is headquartered in Stamford, CT.

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