The consumer price index (CPI) rose 8.5% year-over-year in July, coming in lower than the estimates. While inflation declined from the 40-year high of 9.1% in June, policymakers may not find this level comfortable. So, the Fed may continue its aggressive interest rate hikes.
Following two consecutive quarters of economic contraction, many analysts believe that we are already in a recession. So, the stock market could remain under pressure if the Fed does not ease its policy tightening. Amid this backdrop, it could be wise to add defensive stocks to one’s portfolio.
Crane Holdings, Co. (CR) is a diversified manufacturer of engineered industrial products. The company’s segments include Aerospace & Electronics, Process Flow Technologies, and Payment & Merchandising Technologies.
The company’s Aerospace & Electronics segment supplies critical components and systems. The Process Flow Technologies segment provides engineered fluid handling equipment for critical performance applications. In contrast, the Payment & Merchandising Technologies segment consists of Crane Payment Innovations and Crane Currency.
CR’s four-year average dividend yield is 2.06%, and its current dividend translates to a 1.86% yield. Its dividend has grown at a 6.7% CAGR over the past three years.
CR’s stock has declined 2.3% year-to-date, while it has gained 2.4% over the past year to $101.29.
Here’s what could influence the performance of CR in the upcoming months:
Robust Financials
CR’s net sales increased 1% year-over-year to $864.30 million for the second quarter ended June 30, 2022. The company’s adjusted net income increased 5.3% year-over-year to $223.50 million, and its adjusted EPS increased 8.3% year-over-year to $3.89 for the six months ended June 30, 2022.
Favorable Analyst Estimates
CR’s EPS for fiscal 2022 and 2023 is expected to increase 18.3% and 6.7% year-over-year to $7.75 and $8.27, respectively. Its revenues for fiscal 2022 and 2023 are expected to increase 6.7% and 3.1% year-over-year to $3.39 billion and $3.50 billion, respectively. It has surpassed Street EPS estimates in each of the trailing four quarters.
Discounted Valuation
In terms of forward EV/EBITDA, CR's 8.65x is 22.1% lower than the 11.10x industry average. Its forward P/S of 1.67x is 26.7% lower than the 1.32x industry average. Also, the stock's 10.43x forward EV/EBIT is 31.8% lower than the 15.31x industry average.
Higher Profitability
In terms of trailing-12-month gross profit margin, CR’s 39.14% is 33.4% higher than the 29.34% industry average. Likewise, its 17.10% trailing-12-month net income margin is 152.7% higher than the industry average of 6.77%.
Furthermore, the stock’s trailing-12-month Levered FCF margin came in at 15.55%, compared to the industry average of 3.65%.
POWR Ratings Show Promise
CR has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. CR has a B grade for Value, in sync with its discounted valuation.
It has an A grade for Quality, consistent with its high profitability.
CR is ranked #5 out of 79 stocks in the B-rated Industrial – Machinery industry. Click here to access CR’s Growth, Momentum, Stability, and Sentiment ratings.
Bottom Line
Amid the highly uncertain market conditions, it could be wise to invest in stocks that can withstand the volatility. With strong fundamentals, high profitability, and consistent dividend payments, CR is an ideal defensive stock to add to one’s watchlist.
How Does Crane Holdings, Co. (CR) Stack Up Against its Peers?
CR has an overall POWR Rating of A, equating to a Strong Buy rating. Check out these other stocks within the Industrial - Machinery industry with an A (Strong Buy) or B (Buy) rating: Tennant Company (TNC), Cummins Inc. (CMI), and ABB Ltd (ABB).
CR shares were unchanged in premarket trading Thursday. Year-to-date, CR has gained 0.54%, versus a -10.32% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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