Crane Q4 2024 Earnings Report

Crane EPS Results

• Actual EPS: $1.26
• Consensus EPS: $1.19
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: $0.90

Crane Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $533.93 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Crane Announcement Details

• Quarter: Q4 2024
• Date: 1/27/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, January 28, 2025
• Conference Call Time: 10:00AM ET

Crane (NYSE:CR) Company, together with its subsidiaries, manufactures and sells engineered industrial products in the United States, Canada, the United Kingdom, Continental Europe, and internationally. The company operates in three segments: Aerospace & Electronics, Process Flow Technologies, and Engineered Materials. The Aerospace & Electronics segment supplies critical components and systems, including original equipment and aftermarket parts for commercial aerospace, as well as the military aerospace, defense, and space markets. This segment also offers pressure sensors for aircraft engine control, aircraft braking systems for commercial aircraft and fighter jets, power conversion solutions for spacecraft, and lubrication systems. The Process Flow Technologies segment provides engineered fluid handling equipment for mission-critical applications. It offers process valves and related products, such as lined pipe, fittings and hoses, air-operated diaphragm and peristaltic pumps, instrumentation and sampling systems, valve positioning and control systems, and valve diagnostic and calibration systems; commercial valves; and pumps and systems. The Engineered Materials segment manufactures fiberglass-reinforced plastic panels and coils for use in the manufacturing of recreational vehicles, as well as in commercial and industrial building applications. This segment sells directly to RV, trailer, and truck manufacturers, as well as through distributors and retailers. The company provides its products and solutions to end markets, including commercial and military aerospace, defense, and space; chemical and pharmaceutical production; water and wastewater; non-residential and municipal construction; energy; and other general industrial and consumer-related applications. The company was formerly known as Crane Holdings, Co. Crane Company was founded in 1855 and is based in Stamford, Connecticut.

Crane Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Welcome to the Crane Company 4th Quarter and Full Year 2024 Earnings Conference Call. At this time, all participants have been placed on a listen only mode and the floor will be open for your questions following the presentation. I would now like to turn the call over to Allison Poliniak, Vice President of Investor Relations.

[Allison Poliniak, Vice President - IR at Crane Company]

Thank you, Shelby, and good day, everyone. Welcome to our Q4 2024 earnings release conference call. On our call this morning, we have Max Mitchell, our Chairman, President and Chief Executive Officer Alex Alcolock, Executive Vice President and Chief Operating Officer and Rich Malley, our Executive Vice President and Chief Financial Officer along with Jason Feldman, Senior Vice President, Treasury, Tax and Investor Relations, who is also on for Q and A. We will start off our call with a few prepared remarks from Max, Alex and Rich, after which we will respond to questions. And just a reminder, the comments we make on this call will include some forward looking statements.

[Allison Poliniak, Vice President - IR at Crane Company]

We refer you to the cautionary language at the bottom of our earnings release and also in our annual report, 10 ks and subsequent filings pertaining to forward looking statements. Also during the call, we will be using some non GAAP numbers, which are reconciled to the comparable GAAP numbers in tables at the end of our press release and accompanying slide presentation, both of which are available on our website at www.craneco.com in the Investor Relations section. Now, let me turn the call over to Max.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Thank you, Alison. Thanks, everyone, for joining the call today. Well, a strong close in Q4 to another excellent year with results nicely outperforming our expectations. But before we dive into the results, I would like to touch on a few recent announcements. First, I want to acknowledge Alex Alcala, who was promoted to Chief Operating Officer back in December and who is joining us for the call this morning and moving forward.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Many of you already know him from the 12 years he has been part of the team. But for those that do not, Alex has been an instrumental partner to me as we have strategically transformed Crane's portfolio into a higher growth, higher margin and higher return business. Alex has demonstrated his strategic and operational capabilities in a number of roles at Crane. 1st, as President of our Pumps and Systems business, then as President of our Process Valve Business, followed by roles as Senior Vice President for the Process Flow Technologies segment and as Executive Vice President managing all of our post separation segments and regional teams. His appointment as COO gives me further capacity to focus my attention on accelerating Crane's growth through strategy deployment and strategic acquisitions.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Congratulations, Alex, and thank you for all you do in being Crane and driving results with the team.

[Alejandro Alcala, Executive VP & COO at Crane Company]

Thank you, Max. Thanks for the kind comments. It's been really fun, and I'm so proud of our team. I look forward to continued investor communications.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Also a reminder that on January 2, we announced the completion of the divestiture of our Engineered Materials segment. This divestiture reflects yet another important step forward following the numerous actions we have taken over the last few years to simplify and strengthen our portfolio, focusing resources on our 2 strategic growth platforms, Aerospace and Electronics and Process Flow Technologies. With this divestiture now behind us, we are focused on driving accelerated inorganic growth through capital deployment with our very strong balance sheet, as well as accelerating organic profitable growth through our disciplined cadence and execution. Following that divestiture, the results we speak to today treat Engineered Materials as discontinued operations for all of 2024. Now onto the quarter.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Adjusted EPS of $1.26 was driven by an impressive 8% core sales growth, reflecting strength across both Aerospace and Electronics and Process Flow Technologies. Core orders were also solid, up 8% in the quarter. We continue to drive outstanding results despite some unique and temporary challenges in the quarter we previously discussed, which included the impact of Hurricane Helene on our Marion, North Carolina facility. I'm extremely pleased to report that the site is recovering ahead of schedule and is getting close to normal full production rates. As I highlighted last quarter, a key tenant and strength of the Crane Business System that we have proven time after time over the years is the flexibility and speed to react to issues outside our control.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Our performance in 2024 is another great example of our consistently differentiated performance in the face of adversity. Full year adjusted EPS was $4.88 up 28% over 2023. Sales for 2024 increased 14%, driven by 8% core growth and 6% contribution from acquisitions. Adjusted operating profit of $383,000,000 for the full year increased 29% compared to the prior year. Coming off record performance in 2024 and turning to 2025, I remain highly confident in the strength and resilience of Crane's team and portfolio.

[Max Mitchell, Chairman, President & CEO at Crane Company]

And that confidence is also reflected in the dividend increase announced last night of 12%. In addition, I feel confident in our initial 2025 adjusted EPS guidance of 5.30 dollars to $5.60 dollars solid 12% adjusted EPS growth at the midpoint. In setting our initial view for the year, we assume that the macro backdrop remains largely unchanged with strong demand trends at Aerospace and Electronics and continued market outperformance at Process Flow Technologies even as industrial demand signals remain mixed. Further, our balance sheet is well positioned to capitalize on M and A opportunities. And with continued progress on our existing M and A funnel, we expect additional opportunities to become actionable in 2025 across both Aerospace and Electronics and Process Flow Technologies.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Our funnel is strong. There's a lot of activity. I personally visited 2 potential targets with the team this month alone, 1 in the Midwest, 1 in Europe. And indications are that quite a few assets we've targeted for years will become actionable over the course of 2025. Before turning the call over to Alex, just a quick reminder that we will be hosting an investor meeting at our Aerospace Electronics site in Fort Walton Beach, Florida on March 6, 2025.

[Max Mitchell, Chairman, President & CEO at Crane Company]

This location is the production site for our Defense Power business, which houses manufacturing of our wide range of power conversion products used in applications such as next gen military radars, as an example, with growing capability in ultra high power for emerging ground vehicles and other solutions. I look forward to seeing many of you there. Please reach out to Allison if you need further information. Now let me pass it over to our Chief Operating Officer, Mr. Alex Alcala to highlight some of the key wins and successes in the quarter.

[Alejandro Alcala, Executive VP & COO at Crane Company]

Thanks, Max, and thanks again for the kind introduction. It's been an honor to be on this journey with you and the team as we've continued to transform Crane and unlock value. Our teams are energized about our future and in many ways, I feel we're just getting started. I look forward to seeing many of you in Fort Walton Beach in March, where we will go into a little bit more detail about this robust machine we have built at Crane to continue to drive sustainable, profitable growth. Let me move on now to make some comments on the quarter.

[Alejandro Alcala, Executive VP & COO at Crane Company]

Within Aerospace and Electronics, demand remains strong across all categories of our defense and commercial business. I'm proud to report we received the 1st F-sixteen brake control upgrade order, further solidifying our confidence in a steep ramp up for this program. Starting at the very beginning of 2026. Total orders received for this project are now about $44,000,000 including some foreign military sales. As a reminder, this is a 3 year break modernization program for the U.

[Alejandro Alcala, Executive VP & COO at Crane Company]

S. Air Force fleet of F-sixteen fighter aircraft at about $30,000,000 per year run rate, with total life of program of sales $150,000,000 to $200,000,000 including foreign military sales, most of which will follow the U. S. Portion of the program. We also made continued progress on vehicle electrification demonstrator programs, and we are continuing strong proposal activity on additional AESA radars.

[Alejandro Alcala, Executive VP & COO at Crane Company]

Also, other significant negotiations continue for additional unmanned collaborative combat aircraft programs. Within Process Flow Technologies, we continue to outperform with our results better than we expected in 2024. For 2025, we see little change today in the demand environment, with North America remaining the greatest growth region for Crane. In the Q4, Crane secured a sizable order for a large fertilizer project in the Middle East. Our valves provide superior abrasive resistance and we have a preferred manufacturing location aligned with Saudi Vision 2,030 that prioritizes localization.

[Alejandro Alcala, Executive VP & COO at Crane Company]

And this was a key enabler for this win. And in North America, we received sizable orders related to the expansion of a facility for a large chemical customer. Through the acquisitions of Cryoworx and Technofab, Crane has penetrated the high growth markets of space launch and semiconductor cryogenic equipment market, adding approximately $55,000,000 of revenue and consolidating our position as a top provider of cryogenics vacuum jacketed pipe in the U. S, which we expect to expand further in 2025. Overall, another strong quarter for both Aerospace and Electronics and Process Flow Technologies, both in reported results as well as on our activity supporting current and future growth.

[Alejandro Alcala, Executive VP & COO at Crane Company]

And long term, as we reiterated during our 2024 Investor Day, we remain confident in a 4% to 6% long term core sales growth rate from resilient and durable businesses with solid aftermarket and substantial operating leverage on top of already solid margins today that should lead to double digit average annual core profit growth with potential upside from capital deployment. And we virtually know that the capital deployment opportunity is significant. Now, let me turn the call over to our CFO, Mr. Rich Maue, for more specifics on the quarter and some more details on our guidance.

[Richard Maue, Executive VP & CFO at Crane Company]

Thank you, Alex, and my congratulations as well and welcome to our quarterly calls. Hey, like John C. Reilly playing the part of Dale in the timeless movie classic Step Brothers said to his stepbrother, Brennan, maybe someday we could become friends, friends who ride majestic translucent steeds shooting flaming arrows across the bridge of Hemdale. Alex, as you well know, in addition to driving results and hunting for acquisitions, we like to have fun here at Crane. So you may want to think about what you will bring to the calls here moving forward.

[Alejandro Alcala, Executive VP & COO at Crane Company]

Okay, Rich. That's a very low bar to get over. So let me think about it.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Let's get back to the call.

[Richard Maue, Executive VP & CFO at Crane Company]

Okay. Good morning, everyone. Starting with total company results, We drove 8% core sales growth in the quarter with strength across both segments. Adjusted operating profit increased 38% driven by strong volumes, solid net price and productivity, excellent operating leverage in the quarter.

[Richard Maue, Executive VP & CFO at Crane Company]

Leading indicators were also strong with core FX neutral backlog up 9% compared to last year, driven by outsized strength at Aerospace and Electronics and core orders were up 8% compared to last year as well. Another strong quarter reflecting our focus on accelerating core growth along with our consistently differentiated execution. For the full year, we generated $234,000,000 of adjusted free cash flow from continuing operations and well above the $165,000,000 generated a year ago. Recall, our October free cash flow guidance was for full year free cash flow to be at the lower end of our $55,000,000 to $275,000,000 range. That range included approximately $20,000,000 that we expected from Engineered Materials.

[Richard Maue, Executive VP & CFO at Crane Company]

Excluding Engineered Materials, that range would have been $235,000,000 to $255,000,000 So results were in line with our expectations. And in 2025, we are confident that we will deliver adjusted free cash flow conversion greater than 90% as the supply chain improves. Total debt at the end of 2024 was approximately $247,000,000 with $307,000,000 of cash on hand. Net proceeds of $208,000,000 from the divestiture of the Engineered Materials segment were received after the close of the year. We continue to have substantial financial flexibility with approximately $1,500,000,000 of debt capacity today for M and A.

[Richard Maue, Executive VP & CFO at Crane Company]

As a reminder, we will deploy our capital with the same strict financial and strategic discipline that we always have employed, prioritizing internal investments for growth followed by M and A and returns to shareholders. And as Max noted, our M and A pipeline remains very active and we are excited about our acquisition opportunities in 2025. Now turning to our 2025 guidance. As we enter the year, we are initiating a full year view estimating adjusted EPS to be within a range of $5.30 to $5.60 reflecting 12% year over year growth at the midpoint. Guidance assumes total core growth of 4% to 6% and approximately 12% growth in adjusted operating profit at the midpoint.

[Richard Maue, Executive VP & CFO at Crane Company]

We also expect a 1% to 2% sales benefit from acquisitions and around a 1 point headwind from foreign exchange. Overall, we anticipate another very strong year in 2025. Now for more details on the segments. Starting with Aerospace and Electronics, no material change in end market conditions relative to our expectations, still a very strong demand environment. On the commercial side of the business, aircraft retirements remain very low due to high demand and limitations on aircraft deliveries, resulting from an aging fleet that requires more aftermarket parts and service.

[Richard Maue, Executive VP & CFO at Crane Company]

On the defense side, we continue to see solid procurement spending and a continued focus on reinforcing the broader defense industrial base given heightened global uncertainty today. And as Alex highlighted, we secured a substantial order for the F-sixteen brake control upgrade that we have been highlighting on recent calls. That strong demand was also reflected in our 4th quarter growth rates with sales of $237,000,000 increasing 11% compared to last year with 7% core growth and a 5% benefit from the Vion acquisition. Even with the continued high level of sales growth, our record backlog of $864,000,000 increased even further, up 23% year over year, including 16% core growth and a 7% contribution from the Vion acquisition. In the quarter, total aftermarket sales increased 21% with commercial aftermarket sales up 15% and military aftermarket up 36%.

[Richard Maue, Executive VP & CFO at Crane Company]

And OEM sales increased 7% in the quarter with 10% growth in commercial and up 3% in military. Adjusted segment margin of 23.1 percent increased 290 basis points from 20.2% last year, primarily reflecting higher volumes, price net of inflation and productivity. On a full year basis, core sales growth of 13% exceeded our expectations for the year, as well as our long term targeted range of 7% to 9%. Adjusted operating profit of $217,000,000 increased 36 percent over the prior year with adjusted operating margin expanding 310 basis points to 23.2%. Looking ahead to 2025, we anticipate core sales growth for the year to be up high single digits with that core growth leveraging at 35% to 40%.

[Richard Maue, Executive VP & CFO at Crane Company]

That guidance assumes continued strong sales, but with decelerating year over year growth rates as the comparisons become more challenging offset by the ramp in production at Boeing. While comparisons can create some noise on quarterly growth rates as we have outlined previously, we expect 20 25 core growth core sales growth rate to be followed by continued strong growth in 2026 and for the remainder of this decade. Very confident for yet another outstanding year in 2025. At Process Flow Technologies, we remain well positioned to continue outgrowing our markets. Our site in Marion, North Carolina is well on the path to be back to its full run rate by the end of the month.

[Richard Maue, Executive VP & CFO at Crane Company]

For the quarter, our results included an approximate 0.09 dollars impact from production downtime in Q4, the higher end of our expected $0.05 to $0.10 headwind. Overall, the financial impact from the hurricane will be fully offset by insurance recoveries. Demand trends remain consistent with 2024 with moderate improvement expected in the first half and with further strengthening in the second half. In the quarter itself, we delivered sales of $307,000,000 up 13%, driven by core sales growth of 9% in the quarter along with a 4% benefit from the CryoWorks and Tecnifab acquisitions. Compared to the prior year, core FX neutral backlog decreased 4% based on the timing of projects and core FX neutral orders were up 3%.

[Richard Maue, Executive VP & CFO at Crane Company]

Adjusted operating margin of 20.3 percent expanded 3 30 basis points better than we expected with strong core operating leverage in the quarter driven by productivity, strong net price and higher volumes. On a full year basis, core growth of 5% exceeded our expectations for the year and was at the high end of our long term targeted range of 3% to 5%. Adjusted operating profit of $250,000,000 increased 17% over the prior year with adjusted operating margin expanding 100 basis points to 20.9%. For context, remember that in 2019, just before COVID, margins were 13.6%. As we noted before, this is a significant step function change in margins, which is reflective of our efforts to structurally shift the business to higher growth and higher margin end markets.

[Richard Maue, Executive VP & CFO at Crane Company]

We continue to see opportunity on this journey through contribution from accretive new product introductions, pricing that is both disciplined and appropriately assertive, our continued investments in technology driven product differentiation and continued productivity. Looking ahead to 2025, we anticipate core sales growth for the year to be up low to mid single digits with that growth leveraging above our normal targeted 30% to 35%, given expected mix, strong productivity and pricing benefits. Another fantastic year of performance at Crane in 2024 and strong confidence in continuing to deliver in 2025. Hey, we have a number of analysts with conflicting calls this morning, a very busy morning earnings. So the questions may be a little light this morning.

[Richard Maue, Executive VP & CFO at Crane Company]

And at this point, we are ready to take our first question.

[Operator]

Thank you. The floor is now open for questions.

[Operator]

Thank

[Operator]

you. We'll take our first question from Nathan Jones with Stifel. Your line is open.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Good morning, Nathan.

[Nathan Jones, Managing Director at Stifel Financial Corp]

Good morning, everyone.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Good morning.

[Nathan Jones, Managing Director at Stifel Financial Corp]

I

[Nathan Jones, Managing Director at Stifel Financial Corp]

don't know why anybody would choose another call when they get these results and the comedy show that goes along with it.

[Max Mitchell, Chairman, President & CEO at Crane Company]

We appreciate it. Thanks, Nathan.

[Nathan Jones, Managing Director at Stifel Financial Corp]

I'll start off just with some questions on PFT. Strong growth 8.5% in the 4th quarter, but you did burn off some backlog in the 4th quarter, which I don't think has been typical over the last few years. So just if you could provide a little more color on the dynamics going on there?

[Alejandro Alcala, Executive VP & COO at Crane Company]

Yes, sure. Nathan, this is Alex. So on the backlog, the way I think about it, our backlog grew in the first half really with some timing of project bookings, and then we're able to ship some of that with excellent execution that you see in our results. So it did reduce a little bit in the second half. However, during the last three quarters, our orders have been sequentially pretty consistent.

[Alejandro Alcala, Executive VP & COO at Crane Company]

So the way I think about it is our backlog still finished at a really strong position. When you think about comparing it to 2019, we're up about 40%. So I think we're entering 2025 with a strong backlog and some expectations on some other improvements in demand, pretty confident to hit our guidance of low to mid single digit growth PFT.

[Nathan Jones, Managing Director at Stifel Financial Corp]

Thanks for that one. And maybe this is a bit of a longer term question over the last few years. You commented, I think it was Rich in your comments about having moved the PFT portfolio to higher growth and higher margin businesses, which has obviously been evident in the huge margin expansion you've seen over the last few years. Can you talk about how far you are through that process? When we might see something that approaches a bit more of an equilibrium level?

[Nathan Jones, Managing Director at Stifel Financial Corp]

I know you still intend to outgrow the market and expand margins, but at more of a steady pace rather than this what's been huge margin expansion over the last few years.

[Alejandro Alcala, Executive VP & COO at Crane Company]

Yes. This is Alex again. Thank you for that question. I think when you think about what we talked about in the investor conference where we this has been a journey, a long journey when we have these what we call these growth markets of chemical, pharma, wastewater and cryogenics. 2017, our mix of the portfolio was around that 30% mark, and now we're north of 60%.

[Alejandro Alcala, Executive VP & COO at Crane Company]

And we talked about, in the midterm, trying to reset 70% of our portfolio in these higher growth markets. And that's not counting any improvements in the portfolio through acquisitions. We also talked about line of sight, mid 20s in operating profit. So we still think there is room to improve in the midterm. And what's going to get us there is just continuing to execute our strategy, driving this machine that we call at Crane, which starts with strategy, feeding into innovation, driving commercial excellence, which includes value pricing, some of the simplification that is giving us pricing as well and all the way through operational excellence and building our team, which is really at the end the key.

[Nathan Jones, Managing Director at Stifel Financial Corp]

And then I guess just one more question. Max, you talked about the industrial economy putting out some mixed signals. Maybe you could unpack that a little bit on where the signals are good, where the signals are maybe not so good, if you're expecting just any changes in the cadence of any of those markets, any of those geographies, just any detail you can give us there? Thanks.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Thanks, Nathan. I'll add a little bit and see if Alex has some additional color as well. We're exiting the year and some projects are just as expected, a little lumpy or mixed timing so forth. From a leading indicator standpoint, though, things continue to be fairly strong. And of course, it's early in the new administration.

[Max Mitchell, Chairman, President & CEO at Crane Company]

And so the guidance that we've set, which we have high, high confidence on in terms of the range and being able to deliver and execute on it, I think is I'm probably a little bit more bullish than not actually just in terms of where we are overall. The U. S. Continues to be generally a little stronger, Europe still stagnant, China same. I don't know, Alex, if you'd offer a little bit more about the mix commentary by segment.

[Alejandro Alcala, Executive VP & COO at Crane Company]

Yes. So I think we're not really seeing any particular market or region getting worse. Over the last three quarters, things have been relatively stable. So if we follow the trends, it would imply some improvement as we go into 2025. So we expect to see that.

[Alejandro Alcala, Executive VP & COO at Crane Company]

I think as Max commented, in 2024, Americas, Middle East, APAC were growing and Europe and China were deteriorating and but stabilized. So we expect to see similar dynamic from a regional standpoint. I think in our vertical markets, cryogenics, which is our new business, continues to see strong demand. We expect chemical, we're seeing projects on upgrades, efficiency improvements, capacity expansions moving through the pharmaceutical as well. So I think similar type of activity by markets and regions, but some improvement expected in 2025.

[Nathan Jones, Managing Director at Stifel Financial Corp]

Thanks very much for taking my questions.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Thanks, Nathan.

[Operator]

Thank you. We'll take our next question from Matt Summerville with D. A. Davidson. Your line is open.

[Matt Summerville, Equity Analyst at D.A. Davidson]

Good morning, guys. Maybe Max, you mentioned in your prepared remarks that you've recently been on-site doing some diligence on a couple of potential deals. Can you maybe comment a little bit around the quality of the assets you're looking at, the types of assets, the segments, the size? And then also maybe kind of compare and contrast, all right, what you've seen recently versus what you see coming available to the market over the course of the year? And then I have a couple of follow ups.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Yes, generally, one in A and E, one in PFT. I would say the value enterprise value in the 100 of 1,000,000 of dollars range to 100,000,000 less. So that sweet spot, we kind of see high quality businesses without a doubt. I would almost say consistent with what we're seeing as we're moving forward. So generally pleased with the type of assets that we're looking at as well as those that we expect to come to fruition, some larger, a little larger, but still in our targeted sweet spot that we expect to come to market as well.

[Max Mitchell, Chairman, President & CEO at Crane Company]

That's how I'd frame it up. Do you have anything different, Rich?

[Richard Maue, Executive VP & CFO at Crane Company]

No, I think that's right. I think fitting nicely with our strategy on the 2 in particular that we're looking at that we are looking at and as well for the ones coming up. When you think about the targeted end markets that we're focused on higher growth, the margin potential being there, cash flow accretion being there and so forth.

[Matt Summerville, Equity Analyst at D.A. Davidson]

Got it. With respect to A and E and the high single digit organic, you're sort of projecting this year, can you maybe help parse out a little bit compare and contrast maybe what the assumptions are for commercial between OE and aftermarket and then similarly ultimately how you're thinking about the MAX restart and how you've kind of incorporated that into your commercial OE view?

[Richard Maue, Executive VP & CFO at Crane Company]

So I'll give you

[Richard Maue, Executive VP & CFO at Crane Company]

the pieces, Matt, here in terms of how we're thinking about next year. For commercial OE right now, we are at low double digit is our current view. Military OE is mid single digit. Commercial aftermarket mid to high single digit. And military aftermarket, the same mid to high single digit.

[Richard Maue, Executive VP & CFO at Crane Company]

That's what we've included in our guidance range for you guys this morning.

[Max Mitchell, Chairman, President & CEO at Crane Company]

I think in terms of the MAX startup or continued recovery, we based our guidance on previously communicated ramp rates that I think are fairly achievable conservative. So we understand that Boeing is signaling some accelerated potential there, which is great news. And if so, then we'll be prepared to benefit from that as well.

[Matt Summerville, Equity Analyst at D.A. Davidson]

And then maybe last question, when you kind of fold together what you said in the prepared remarks and Q and A, Rich, can you maybe help a little bit with how we should be thinking about the overall quarterly earnings cadence as we move through the year in 2025 for Crane overall?

[Richard Maue, Executive VP & CFO at Crane Company]

Sure. So I mean, on balance, it's roughly fifty-fifty first half, second half. The first quarter will be seasonally, I would say, the lowest, if that helps you, Matt. I think you should be able to square that off with your modeling.

[Matt Summerville, Equity Analyst at D.A. Davidson]

And then how does yes, so I guess just one quick follow-up to that. The business interruption insurance recovery, how much in total do you expect on a per share basis? Is that fully baked in the guide? And where should we be kind of thinking about having that in numbers, so to speak?

[Alejandro Alcala, Executive VP & COO at Crane Company]

We expect the recovery should be something similar to the income that was lost in the second half of last year. From a timing perspective, we would expect to receive that probably in the Q2 this year, potentially the 3rd. And yes, it's included in that.

[Matt Summerville, Equity Analyst at D.A. Davidson]

Okay. And that Okay, perfect. Thank you very much guys.

[Richard Maue, Executive VP & CFO at Crane Company]

Thanks, Matt. Thank you.

[Operator]

Thank you. And we'll take our next question from Jordan Lanay with Bank of America. Your line is open.

[Richard Maue, Executive VP & CFO at Crane Company]

Good morning, Jordan.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

Hey, good morning.

[Richard Maue, Executive VP & CFO at Crane Company]

Good morning.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

For the margins for 2025, could you give us details on how you're thinking about mix of pricing versus volume and overhead absorption?

[Richard Maue, Executive VP & CFO at Crane Company]

Yes. So look, our overall guide has got some it's a pretty healthy overall leverage rate as you probably calculated north of I think on average what we would expect given our algorithm that we've previously communicated. Look, the way to think about price in our guide, we're going to more than offset inflation as a baseline. I think that goes without saying. And then we're going to continue to do all the right work we have been with respect to value pricing and other initiatives in that regard as we move forward.

[Richard Maue, Executive VP & CFO at Crane Company]

In terms of absorption and the facilities, those volumes will come in and they will leverage at each respective businesses leverage rate and that is baked into that 40%. I think it's a little bit north of 40% on the guide.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

Okay. Got it.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

And then also to are you guys concerned at all for any of the exposure you guys have in China for PST and those programs are ramping if the new administration does go through with aggressive tariffs and potential retaliation from the China side?

[Max Mitchell, Chairman, President & CEO at Crane Company]

I have very little concern. I think our position in China from our localization content is not so material. We understand the supply base. We've been very, very effective at managing inflationary measures. I think we're not going to overreact.

[Max Mitchell, Chairman, President & CEO at Crane Company]

I'm not that concerned. I'm not going to overreact. We're going to wait and see what happens. And I think we're well prepared to address whatever measures get put in place. That's how I'm thinking about it, Jordan.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

Got it. Awesome. Thank you guys so much.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Thank you.

[Richard Maue, Executive VP & CFO at Crane Company]

Thank

[Operator]

you. We'll take our next question from Justin Aches with CJS Securities. Your line is open.

[Richard Maue, Executive VP & CFO at Crane Company]

Good morning, Justin.

[Justin Ages, Director - Equity Research at CJS Securities]

Thanks.

[Justin Ages, Director - Equity Research at CJS Securities]

Good morning, all. Just a quick housekeeping one to start. Is there any transaction related

[Justin Ages, Director - Equity Research at CJS Securities]

And if they were transaction expenses

[Alejandro Alcala, Executive VP & COO at Crane Company]

are usually treated as non GAAP.

[Alejandro Alcala, Executive VP & COO at Crane Company]

Yes, nothing. And if they were transaction expenses are usually treated as non GAAP anyway, but nothing related to engineering material.

[Richard Maue, Executive VP & CFO at Crane Company]

Yes.

[Richard Maue, Executive VP & CFO at Crane Company]

And I would say that, obviously, most of the work was done prior to the end of the year since we closed in early January. So, we have a modest TSA arrangement in place and it will be a very fast separation.

[Justin Ages, Director - Equity Research at CJS Securities]

Okay. And then on the prior couple of earnings calls, you guys called out some work on the nuclear side in the valves. Just wondering if you're continuing to see good demand there? Or just want to get a sense if that's changed since the election.

[Max Mitchell, Chairman, President & CEO at Crane Company]

It's less material for us overall, but it's still an important business. What's our percentage of total revenue? 7%. 7%. We just as a reminder to our investors, we have valve services that nuclear valve services, we provide new plant construction, the AP1000, we've supplied valves as well as turnaround work.

[Max Mitchell, Chairman, President & CEO at Crane Company]

When a nuclear power plant goes down for shutdown and gets refueled, there's regulatory requirements for going in and refurbishing and inspecting the valves. We have a company that provides that service, very, very good business. And certainly, the resurgence and reopening of nuclear plants has been favorable for us for this business. In addition, anytime that you see the most recent announcement also that there's interest in restarting plants, we benefit as well on the plant startup with helping to get it back up in order. So we're seeing that initiative.

[Max Mitchell, Chairman, President & CEO at Crane Company]

We also the team is working with next gen small modular reactor providers to help get specified. This goes out many, many years, of course, from a long cycle standpoint, but to get specified into new plant construction from that standpoint as well. So less material for us, but a great little business and benefiting for sure with the nuclear resurgence overall.

[Justin Ages, Director - Equity Research at CJS Securities]

All right. That's very helpful. Thank you.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Thanks, Justin.

[Operator]

Thank you. We'll take our next question from Tony Bancroft with Gabelli Funds. Your line is open.

[Tony Bancroft, Portfolio Manager at Gabelli Funds]

Good morning, team. Congratulations, Alex, on the promotion, very well deserved. I'm sure your first task, Max, will have you heading out to the Catalina wine mixer to snap the necks and cash the checks.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Rich wanted to start a new company called Prestige Worldwide.

[Tony Bancroft, Portfolio Manager at Gabelli Funds]

Oh boy, what a great it will be wonderful, wondrous. So now you're a $10,000,000,000 company, you've grown, you've had extreme performance over the last few years. You've done your portfolio cleaning. And I think you sort of look out and say, this is what's next for this company. And is there any and I know you've talked about sort of the longer term of the Arrow and PFT growing that to the appropriate level.

[Tony Bancroft, Portfolio Manager at Gabelli Funds]

But you have some competitors that are have similar businesses to you. Is there any opportunity to do something larger or more transformational? Do you ever think about that? Does that sort of get into your conversations on sort of large scale planning? Just any thoughts on that, Mac?

[Max Mitchell, Chairman, President & CEO at Crane Company]

Yes. No, thanks for that, Tony. I really appreciate it. For sure, I mean, we go through a range of strategic planning on a regular basis that takes into consideration all permutations and scenarios. I don't we certainly don't want to say that it's something that we have clear clearly set our sights on.

[Max Mitchell, Chairman, President & CEO at Crane Company]

I don't want to in any way concern investors. Whatever we do is going to make sense. It's going to be right down the sweet spot. It's going to be something that we can clearly integrate and do well. But we've looked at some larger assets as well.

[Max Mitchell, Chairman, President & CEO at Crane Company]

And we continue we can even consider not just cash, but does it ever make sense to use our equity as a currency also. Not something that we've got teed up in the immediate future, but things that we look at also. So we were looking we will continue to look at all opportunities to continue to drive shareholder value and some of those are larger opportunities that could be quite synergistic.

[Tony Bancroft, Portfolio Manager at Gabelli Funds]

Thanks so much, Max and team. Great job.

[Max Mitchell, Chairman, President & CEO at Crane Company]

Thanks, Tony.

[Richard Maue, Executive VP & CFO at Crane Company]

Thank you.

[Operator]

Thank you. This concludes the Q and A portion of

[Max Mitchell, Chairman, President & CEO at Crane Company]

Thank you, operator. Hey, again, yet another strong year with results outperforming expectations, even with surprises outside our control that our teams reacted to incredibly well. 2024 proved that our strategy is working. The team is executing, driving improved earnings through its growth and commercial excellence initiatives. Our M and A pipeline is full and we have the balance sheet capacity to execute.

[Max Mitchell, Chairman, President & CEO at Crane Company]

We're well positioned for continued growth and delivering on expectations in 2025 and look forward to another hugely successful year. We look forward to seeing many of you on Wednesday evening and Thursday, March 5th 6th at our Investor Day in Fort Walton Beach, Florida, we will highlight the machine we have in place with our holistic crane business system strategy, discipline, cadence and execution. Like the late great Quincy Jones said, every day my father told me the same thing. Once a task has just begun, never leave it until it's done. Be the labor great or small, do it well or not at all, right, Alex?

[Alejandro Alcala, Executive VP & COO at Crane Company]

Absolutely.

[Max Mitchell, Chairman, President & CEO at Crane Company]

At Crane, we sweat the small details in our culture and business system because our team knows that this adds up to outsized results and performance and execution in driving profitable growth. Thank you all for your interest in Crane and your time and attention this morning. Have a great day.

[Operator]

Thank you. This concludes today's Crane Company 4th quarter and Full Year 2024 Earnings Conference Call. Please disconnect your line at this time and have a wonderful day.

Participants

Executives

• Allison Poliniak, Vice President - IR
• Max Mitchell, Chairman, President & CEO
• Alejandro Alcala, Executive VP & COO
• Richard Maue, Executive VP & CFO

Analysts

• Nathan Jones, Managing Director at Stifel Financial Corp
• Matt Summerville, Equity Analyst at D.A. Davidson
• Jordan Lyonnais, Equity Research Associate at Bank of America
• Justin Ages, Director - Equity Research at CJS Securities
• Tony Bancroft, Portfolio Manager at Gabelli Funds