Aerospace Orders and Pricing Drive Outperformance Amid Tariff Uncertainty

Industrial conglomerate Crane (NYSE:CR) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 9.3% year on year to $557.6 million. Its non-GAAP profit of $1.39 per share was 6.9% above analysts’ consensus estimates.

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Revenue: $557.6 million vs analyst estimates of $549.1 million (9.3% year-on-year growth, 1.5% beat)
Adjusted EPS: $1.39 vs analyst estimates of $1.31 (6.9% beat)
Adjusted EBITDA: $116.6 million vs analyst estimates of $114.9 million (20.9% margin, 1.5% beat)
Management reiterated its full-year Adjusted EPS guidance of $5.45 at the midpoint
Operating Margin: 18.1%, up from 15.9% in the same quarter last year
Free Cash Flow was -$60.4 million compared to -$89 million in the same quarter last year
Organic Revenue rose 7.5% year on year (5% in the same quarter last year)
Market Capitalization: $9.75 billion

Crane’s first quarter results reflected solid execution in its core segments, with management highlighting notable growth across both Aerospace & Electronics and Process Flow Technologies. CEO Max Mitchell credited the company’s business system and disciplined operational execution for driving 7.5% core sales growth, emphasizing that “strength across both Aerospace & Electronics and Process Flow Technologies” supported the quarter. Management pointed to strong performance in commercial aftermarket sales and strategic wins in defense programs as key contributors to order momentum.

Looking ahead, Crane’s leadership reaffirmed its full-year adjusted EPS guidance, citing confidence in the company’s ability to navigate macroeconomic uncertainty, including evolving tariff policies and supply chain conditions. COO Alex Alcala detailed the company’s strategies to offset tariff impacts, such as pricing actions and productivity improvements, and stressed that investments in new product development and acquisitions remain central to Crane’s growth plan. CFO Rich Maue added that the company’s robust backlog and healthy balance sheet provide flexibility to pursue acquisitions even as external pressures persist.

Management focused on how the company’s diversified end markets, operational discipline, and backlog growth positioned Crane for continued performance. The primary deviation from consensus expectations stemmed from stronger-than-anticipated Aerospace & Electronics orders.

Aerospace Aftermarket Momentum: Commercial and military aftermarket demand remained elevated, with management reporting ongoing strong procurement activity and limited signs of fleet retirement. This helped sustain double-digit growth in aftermarket sales for a sixteenth consecutive quarter.
Defense Program Wins: Crane secured new content on major defense platforms, including the XM30 optionally manned fighting vehicle and Bell V-280, as well as engineering contracts for unmanned aviation. These wins are expected to support growth throughout the decade.
Process Flow Technologies Portfolio Shift: Management discussed continued portfolio realignment toward higher-growth sectors like pharmaceuticals, water, and cryogenics, with recent wins including pharmaceutical valve approvals and significant projects in the Middle East.
Tariff Exposure Management: Leadership detailed that 7%–8% of cost of goods sold comes from direct imports, primarily affecting Process Flow Technologies. While tariffs represent a $60 million gross headwind for 2025, Crane expects to offset most of the impact through price increases and productivity gains.
M&A Pipeline Remains Active: CEO Max Mitchell and COO Alex Alcala both emphasized ongoing due diligence across multiple acquisition targets. The company’s net cash position and $1.5 billion in debt capacity provide ample resources to pursue both small and larger deals this year.

Looking forward, management’s outlook is shaped by its diversified market exposure, ability to adjust pricing, and continued investment in both organic and inorganic growth initiatives.

Pricing and Productivity Initiatives: Management expects pricing actions—estimated at around 3% overall—to help offset tariff headwinds and support margin stability, especially in Process Flow Technologies.
Order Backlog Conversion: The robust order backlog, particularly in Aerospace & Electronics, is expected to support revenue visibility into 2026, with multi-year defense contracts and commercial aerospace ramp-ups providing a buffer against near-term demand shifts.
Acquisition Strategy: Crane’s leadership reiterated its intent to deploy capital into strategic M&A opportunities, viewing acquisitions as a critical lever for accelerating long-term growth beyond current organic trends.

Damian Karas (UBS): Asked how much pricing is contributing to 2025 sales and whether the strong Aerospace & Electronics backlog relates to longer-term orders. Management estimated roughly 3% price contribution and clarified that much of the backlog extends beyond the current year, supporting future growth.
Scott Deuschle (Deutsche Bank): Inquired about the split between volume and price in Aerospace & Electronics growth and whether major original equipment manufacturer (OEM) contracts were repriced. CFO Rich Maue noted a 50-50 split between volume and price and stated that no significant contract repricing occurred this quarter.
Jeffrey Sprague (Vertical Research): Sought clarification on tariff exposure and potential demand risks, especially in chemicals. Leadership quantified the tariff headwind at approximately $60 million and acknowledged some project delays in chemicals, particularly in Europe and the U.S.
Nathan Jones (Stifel): Questioned supply chain risks and whether customers were pre-buying ahead of tariffs. Management indicated supply chains are generally stable and that any pre-buying was minimal; recent order strength was driven by longstanding projects rather than inventory maneuvers.
Jordan Lyonnais (Bank of America): Asked if macro uncertainty was slowing M&A activity. CEO Max Mitchell confirmed Crane’s acquisition pipeline remains active, with several due diligence processes underway and no observed slowdown.

In the coming quarters, our analysts will monitor (1) the pace of Aerospace & Electronics backlog conversion and whether commercial aftermarket demand can remain resilient, (2) the effectiveness of Crane’s tariff mitigation strategies in sustaining margins, and (3) progress on acquisitions or integration of recently acquired businesses. Additionally, we will track developments in key end markets such as pharmaceuticals, water, and cryogenics, which management identified as growth priorities.

Crane currently trades at a forward P/E ratio of 29.9×. Is the company at an inflection point that warrants a buy or sell? The answer lies in our free research report.

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