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    Crane (CR)

    CR Q2 2025: A&E Backlog +29%, Boosts Revenue Visibility

    Reported on Jul 29, 2025 (After Market Close)
    Pre-Earnings Price$198.35Last close (Jul 29, 2025)
    Post-Earnings Price$198.35Open (Jul 30, 2025)
    Price Change
    $0.00(0.00%)
    • Robust Backlog Growth: The A&E segment’s backlog grew 29% YOY (with orders scheduled into 2026 and 2027), indicating a strong, broad‐based order book across both commercial and military markets that supports future revenue visibility.
    • Compelling PSI Acquisition: The pending PSI acquisition enhances Crane’s sensor technology portfolio with proven aftermarket strength and clear paths for margin improvement, efficiently integrating complementary businesses into the existing operating model.
    • Accelerating Aftermarket Revenue: Programs like the GTF are showing solid growth—with aftermarket revenues growing around 15% this year and an expected acceleration to 30% next year—creating a recurring revenue stream that bolsters overall profitability.
    • Margin Pressure in A&E Segment: The Q&A revealed that A&E margins are expected to drop to around 30% in the second half, which is below their longer‐term margin framework. This indicates potential pressure on profitability if the unfavorable mix between commercial OEM and aftermarket orders persists.
    • Soft Order Flow in Key Markets: Executives highlighted softness in certain end markets, particularly in the European chemical sector, where project slippage was noted. This deferral of orders could hinder revenue growth and add uncertainty to future results.
    • Risks with Acquisition Integration: The pending PSI acquisition carried integration and execution risks, with significant margin improvement required to achieve the targeted 10% ROIC within five years. The reliance on future synergy benefits and the uncertainty around near-term operational execution add downside risk.
    MetricYoY ChangeReason

    Total Revenue

    -0.7%

    Despite strong underlying performance in the Aerospace & Electronics (up 11.8%) and Process Flow Technologies (up 7.2%) segments, overall revenue declined slightly likely due to offsets from unfavorable currency translation, margin dilution from integration or mix factors, and potential declines in other revenue components compared to Q2 2024.

    Aerospace & Electronics

    +11.8%

    The segment’s robust 11.8% revenue increase is driven by continued strong core sales and aftermarket momentum witnessed in previous periods (with past growth of 10–20% and contributions from higher pricing and increased volumes), supported by favorable market conditions such as higher commercial and defense demand and Boeing’s production ramp-up.

    Process Flow Technologies

    +7.2%

    The 7.2% revenue increase reflects the continuation of trends seen in prior periods where core sales growth and strategic acquisitions (from CryoWorks and Technifab) boosted performance, despite headwinds from foreign exchange; the segment’s focus on high-growth markets and productivity improvements further underpinned its growth in Q2 2025.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Full-Year Adjusted EPS Guidance

    FY 2025

    $5.30 to $5.60

    $5.50 to $5.80

    raised

    Corporate Expense

    FY 2025

    $80 million

    just above $80 million

    no change

    Aerospace and Electronics Segment – Core Sales Growth

    FY 2025

    no prior guidance

    up high single digits to low double digits

    no prior guidance

    Aerospace and Electronics Segment – Operating Margin Leverage

    FY 2025

    no prior guidance

    35% to 40%

    no prior guidance

    Process Flow Technologies Segment – Core Sales Growth

    FY 2025

    no prior guidance

    lower end of the low to mid-single-digit range

    no prior guidance

    Process Flow Technologies Segment – Volume Leverage

    FY 2025

    no prior guidance

    30% to 35%

    no prior guidance

    Earnings Cadence

    FY 2025

    Anticipated earnings for Q2 2025 to be slightly down compared to Q1 2025, with the full year being equally weighted

    Second-half earnings will be weighted more towards Q3, consistent with typical seasonality

    no change

    TopicPrevious MentionsCurrent PeriodTrend

    Consistent robust order backlog growth across segments

    Mentioned in Q1 2025 with record backlogs and broad-based growth , in Q4 2024 with record A&E backlog growth , and in Q3 2024 with strong core orders and double‐digit increases

    In Q2 2025, the company reported robust order backlog growth across segments – notably a record high of over $1 billion in the Aerospace & Electronics segment with 29% YoY and 9% sequential growth

    Consistent and positive: The narrative remains steady with continued reinforcing growth and record backlogs.

    Recurring M&A activities and acquisition integration risks

    Highlighted in Q1 2025 with an active M&A pipeline and robust integration processes , in Q4 2024 with a strong capital position and planned visits to targets , and in Q3 2024 with a full pipeline and disciplined discipline

    Q2 2025 emphasized a robust pipeline of opportunities, detailed integration planning for the PSI acquisition, and balanced funnel across segments

    Steady and focused: Consistent active pursuit of M&A with continued attention to integration excellence.

    Shifting margin dynamics with periods of expansion versus pressure

    In Q1 2025, margins were described as expanding through higher volumes and improved pricing ; in Q4 2024, significant margin expansion in PFT and a long-term focus on improvements were highlighted ; in Q3 2024, margin expansions in key segments were reinforced through productivity and pricing

    Q2 2025 noted a record-high adjusted margin of 26.3% in A&E, driven by higher volumes and favorable pricing, but also warned of margin pressure later in the year due to an unfavorable sales mix

    Mixed but cautiously optimistic: Strong current expansion with an eye on near-term headwinds.

    Evolving demand in key end markets, particularly in European and Chinese regions

    In Q1 2025, European chemical markets were soft while other segments like water and aerospace showed strength ; in Q4 2024, Europe and China were described as stagnant but stable ; in Q3 2024, Europeans and Chinese end markets were noted as challenged with project pushouts

    Q2 2025 reported softness in the European chemical market with delayed projects, and while China was mentioned in relation to tariff impacts, there was no detailed discussion on demand trends

    Slightly subdued: European demand remains soft while Chinese demand insights have diminished compared to prior periods.

    Tariff headwinds and supply chain/lead time challenges

    In Q1 2025, tariffs were estimated to add $60 million in costs with detailed exposure across regions and supply chain conditions were noted ; in Q4 2024, minimal concern was expressed over tariffs and supply chain improvements were highlighted despite hurricane impacts ; in Q3 2024, some supply chain constraints were mentioned amid external factors

    Q2 2025 discussed a tariff cost increase of about $30 million due to reduced China tariffs, with pricing and productivity expected to offset the headwinds; no mention of supply chain or lead time challenges

    Steady with adjusted focus: Tariff pressures persist but are better managed, and supply chain issues appear less prominent now.

    Emerging growth in aftermarket revenue, cryogenics, and enhanced sensor technology

    Q1 2025 highlighted strong aftermarket growth (20% overall, with double-digit growth in cryogenics and emerging sensor tech initiatives) ; Q4 2024 noted mid- to high-single digit guidance for aftermarket and solid expansion in cryogenics and sensor-related programs ; Q3 2024 reported robust aftermarket increases and expansion in cryogenics and sensor technology orders

    Q2 2025 reported strong aftermarket revenue growth expectations (15% this year and 30% next year), double-digit growth in cryogenics with record order backlog, and acquisition-fueled enhancements in sensor technology capabilities

    Strong and growth-oriented: Consistent momentum with an expanded focus that reinforces future opportunities.

    Transformation of the Process Flow Technologies (PFT) portfolio toward high-growth markets

    Q1 2025 detailed systematic repositioning toward chemical, pharma, water/wastewater, cryogenics, and industrial automation ; Q4 2024 emphasized a long-term journey from 30% to over 60% in high-growth markets with a target of 70% ; Q3 2024 underscored the structural shift with considerable margin expansion and strategic acquisitions

    Q2 2025 continued the transformation with clear repositioning in key end markets such as chemical, pharmaceutical, and water sectors, supported by record wins and broad market engagement

    Consistent strategic evolution: The transformation is ongoing with strong execution and visible market wins driving the long-term growth outlook.

    Increased exposure to external risks including geopolitical uncertainties and natural disasters

    Q3 2024 mentioned significant impacts from hurricanes and typhoons along with readiness for geopolitical shocks ; Q4 2024 addressed hurricane impacts and noted minimal geopolitical concerns regarding China

    Q2 2025 did not mention external risks such as geopolitical uncertainties or natural disasters

    Reduced emphasis: External risks were a notable theme previously but are not highlighted in the current period.

    1. PSI Integration
      Q: How will PSI drive margin improvements?
      A: Management emphasized that PSI will be run differently—with focused cost efficiency and a clear plan to achieve 10% ROIC by year five through operational discipline rather than traditional synergies.

    2. A&E Backlog
      Q: What drove 29% A&E backlog growth?
      A: Management noted that broad-based order strength, especially in air defense and commercial OEM, fueled the impressive 29% YoY and 10% sequential backlog increases.

    3. Margin Outlook
      Q: Why expect lower A&E margins in H2?
      A: They explained that a mix shift toward commercial OE and challenging aftermarket comps will lower H2 margins to around 30%, though full-year targets remain at 35–40%.

    4. GTF Program
      Q: Is GTF significant in aftermarket sales?
      A: Management confirmed that GTF represents less than 5% of commercial aftermarket sales but is growing strongly, with aftermarket repair revenues rising around 15% this quarter.

    5. Acquired Intangibles
      Q: What’s the intangibles amortization impact?
      A: They mentioned an estimated impact of about $7M to EPS, with final details to be clarified in further guidance.

    6. PFT Orders
      Q: How are PFT orders trending across regions?
      A: Management described stable overall order cadence with softness in European chemical markets offset by strong performance in cryogenics and biopharma sectors.

    7. R&D Tax Impact
      Q: How do R&D tax changes affect cash flow?
      A: They expect a modest free cash flow improvement—less than a 5% boost—due to accelerated depreciation benefits.

    8. Nuclear Opportunity
      Q: What is the outlook for nuclear business growth?
      A: Management is confident in a strong nuclear strategy focused on replacement, new plant restarts, and SMRs, leveraging established partnerships for further market expansion.

    9. PSI Closing Timeline
      Q: Will PSI deal close earlier than expected?
      A: Management reiterated that the PSI deal remains on track for a January 1 closing, with no changes to the timeline.

    Research analysts covering Crane.