Crane Stock's Quarter On-Track For a Bullish Year?

photo of interior of fabrication plant

Key Points

  • Crane stock reported its first quarter 2024 earnings, showing investors why it may be one of the best stocks in the sector.
  • With rising price targets and a boost in management guidance, the odds favor investors looking to beat the market this year. 
  • Shares were up more than 6.3% after the announcement, making a new 52-week high.
  • 5 stocks we like better than Bank of America

The first quarter of the 2024 earnings season has kicked off. This quarter is typically regarded as giving investors the initial pulse of the economy for the rest of the year. It could also be the time for the manufacturing sector to shine. After reporting its quarterly earnings, shares of Crane NYSE: CR are up by more than 6.3% for the trading session on April 23.

Crane is looking to ride the remainder of the industrial stocks wave this year. After all, it has outperformed the Industrial Select Sector SPDR Fund NYSEARCA: XLI by as much as 65% over the past 12 months

Considering that the industrials space also outperformed the broader S&P 500 by 5% over the past six months, Crane stock could be the best-performing stock in one of the best-performing sectors. Beyond price action, there are a few other reasons why Crane stock is becoming a Wall Street favorite today. 

Not Your Father's Bull Market

In years past, the bull market for U.S. equities tended to be more inclusive, boosting the manufacturing and business services sectors. This time around, the COVID-19 pandemic caused severe economic dislocation. 

Because the Federal Reserve (the Fed) needed to lower interest rates near zero to combat a sluggish economy, the two areas of the economy started to behave in opposite ways. Investors can see this divergence live by following the ISM manufacturing PMI index compared to the ISM services PMI index. 

However, after contracting for over a year, manufacturing is starting to take off. Analysts at The Goldman Sachs Group Inc. NYSE: GS expressed this breakout in their 2024 macro outlook report a few months ago, and so far, they are right. 


On the other hand, services have slowed down its expansion pace in the past quarter, a sign of changing times. With stocks like Netflix Inc. NASDAQ: NFLX selling off by as much as 15% after reporting first-quarter 2024 earnings, as opposed to Crane's near double-digit rally, investors can see this divergence at play. 

This divergence stems from the Fed's proposed interest rate cuts for 2024, which could weaken the dollar, making American exports more attractive to foreign buyers. 

February's manufacturing PMI showed a 6.4% jump in export orders for the U.S., proving this thesis right thus far. The macro picture is set, but why choose Crane stock? 

It's a Wall Street Favorite so Far

Two things typically drive stock prices: Earnings growth and how markets feel about these earnings projections. Compared to the industrial sector's expected 10% earnings per share (EPS) growth, Crane's 8.9% may be a conservative bet. 

There must be a reason why markets value this stock at a 50.6% premium to aerospace and defense competitor Lockheed Martin Co. NYSE: LMT. On a forward price-to-earnings ratio (P/E) basis, Crane's 24.5x multiple shows a market willingness to pay over Lockheed's 16.3x valuation. 

Lockheed stock analysts think the company will grow its EPS by 8% this year, on par with Crane's. Despite being the smaller company, with only a $7.8 billion market capitalization compared to Lockheed's $111 billion, Wall Street analysts think these two could achieve the same growth rate. 

Now, for the reason behind Wall Street's willingness to pay. It seems to be all about future sales and sales quality for Crane, as markets specifically pay a 125% premium for its sales versus Lockheed's. A price-to-sales (P/S) ratio of 3.6x places expectations for Crane's revenue above Lockheed's 1.6x

Crane's First Quarter: Investor Bullseye

Crane Today

Crane stock logo
CRCR 90-day performance
Crane
$145.41
-0.17 (-0.12%)
(As of 05/17/2024 08:53 PM ET)
52-Week Range
$72.02
$150.01
Dividend Yield
0.56%
P/E Ratio
19.26
Price Target
$139.50

In the first quarter of the 2024 earnings release, management mentioned Crane's signed agreement to acquire CryoWorks. This acquisition is expected to add about $28 million in annual sales to the company, which is why the P/S ratio is richer. 

Over the year, EPS grew by 14.3% before the macro manufacturing tailwinds and the CryoWorks acquisition. Investors may wonder whether today's EPS projections reflect the company's financial future. 

With geopolitical tensions rising, Crane's exposure to defense equipment may be of interest to investors, as management has raised 2024 guidance. Sales growth is now set to 10% (8% previously), and EPS guidance has also been raised by $0.20. 

By raising their price targets to $150 a share from $135, analysts at Stifel Nicolaus now see a net 8.7% upside in Crane stock. Bank of America Co. NYSE: BAC also saw it fit to boost its targets from $110 to $140. Wall Street's favoritism could go beyond price action this time around.  

Should you invest $1,000 in Bank of America right now?

Before you consider Bank of America, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Bank of America wasn't on the list.

While Bank of America currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

These 7 Stocks Will Be Magnificent in 2024 Cover

With average gains of 150% since the start of 2023, now is the time to give these stocks a look and pump up your 2024 portfolio.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Industrial Select Sector SPDR Fund (XLI)N/A$125.33+0.1%1.28%26.03N/AN/A
Crane (CR)
4.08 of 5 stars
$145.41-0.1%0.56%19.26Moderate Buy$139.50
The Goldman Sachs Group (GS)
4.6778 of 5 stars
$467.72+0.7%2.35%18.26Moderate Buy$440.57
Netflix (NFLX)
4.0811 of 5 stars
$621.10+1.7%N/A43.10Moderate Buy$630.53
Lockheed Martin (LMT)
4.5063 of 5 stars
$466.20+0.3%2.70%17.06Hold$485.40
Bank of America (BAC)
4.5837 of 5 stars
$39.29+0.2%2.44%13.60Moderate Buy$38.70
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


Featured Articles and Offers

Search Headlines: