Crane pany(US:CR)2022-10-25 20:42Financial Data and Key Metrics Changes - Third quarter adjusted EPS was $1.86, a decline of $0.12 compared to last year, primarily due to a $0.16 impact from the divestiture of Crane Supply and a $0.19 impact from an unusually low tax rate last year. Adjusting for these items, adjusted EPS increased by 14% year-over-year [10] - Core sales growth was 2%, impacted by supply chain constraints and challenging comparisons for the Payment & Merchandising Technologies segment. Core year-over-year orders increased by 10% and core year-over-year backlog increased by 26% [11][12] - Free cash flow was negative $439 million in the quarter due to one-time contributions related to the asbestos liabilities divestiture, but excluding these items, free cash flow increased to $137 million from $108 million last year [42] Business Line Data and Key Metrics Changes Aerospace & Electronics - Sales of $167 million decreased by 1% compared to last year, with segment margins at 16.9%, down from 19.3% last year. Core orders increased by 30% and backlog increased by 24% [23][24] - Total aftermarket sales declined by 3%, while commercial aftermarket sales increased by 16% [25] Process Flow Technologies - Sales of $250 million decreased by 16%, driven by a 20% impact from the divestiture of Crane Supply and a 5% impact from unfavorable foreign exchange. Core growth was strong at 9% [30] - Core FX-neutral orders increased by 13% and core FX-neutral backlog increased by 16% [31] Payment & Merchandising Technologies - Sales of $335 million decreased by 8%, with a 3% decrease in core sales and a 6% impact from unfavorable foreign exchange. Operating margins improved to a record 25.9% [36][37] - Core order growth was 4% and core backlog growth was 40% [38] Engineered Materials - Sales of $63 million increased by 4% compared to the prior year, with operating profit margins decreasing to 10.8% [41] Market Data and Key Metrics Changes - Demand remains strong across nearly all core markets, with continued robust demand indicators despite global macroeconomic uncertainties [12] - Trends in China are strong, with accelerating investments in projects, while Europe has weakened slightly due to energy cost concerns [34] Company Strategy and Development Direction - The company is focused on driving growth, advancing technology, and preparing for the separation into Crane Company and Crane NXT, targeted for early April 2023 [14][15] - The separation is expected to unlock shareholder value and allow each company to optimize capital allocation and accelerate growth [15] Management's Comments on Operating Environment and Future Outlook - Management noted continued momentum with strong results and robust demand across end markets, despite supply chain challenges [12] - The supply chain environment is expected to improve gradually throughout 2023, with a return to a fully unconstrained environment anticipated by 2024 [28] Other Important Information - The company expects to achieve full-year adjusted free cash flow guidance of $350 million to $390 million, with a focus on inventory management to protect customers [43] - The balance sheet is in good shape, with adjusted gross leverage expected towards the bottom of the 2 to 3x target range for the current credit rating [44] Q&A Session Summary Question: Can you provide details on the backlog growth in the Payments segment? - The backlog growth was driven more by CPI than Crane Currency, with both segments seeing strong double-digit growth [51][52] Question: What is the outlook for federal government print orders for fiscal '23? - The expectation is for orders to be in a similar range as the previous year, with ongoing constraints in manufacturing capacity [55][56] Question: How is the PFT segment performing against prior guidance? - The segment is performing better than expected, with strong order growth primarily driven by pricing initiatives [59][60] Question: What is the expected price carryover into 2023? - There will be price carryover next year, but it will not be as significant as double or 50% carryover [85] Question: What are the expectations for corporate expenses for the year? - Corporate expenses are trending higher than the $75 million guide, but the outlook remains unchanged [88]