Executive Summary / Key Takeaways

• Crane Company's strategic transformation, underpinned by its "Crane Business System" and disciplined M&A, is yielding robust financial performance and expanding margins across its Aerospace & Electronics (A&E) and Process Flow Technologies (PFT) segments.
• The pending Precision Sensors & Instrumentation (PSI) acquisition, expected to close by year-end 2025 or early 2026, is a significant accelerant, adding proprietary sensor technologies and further strengthening its core industrial and aerospace niches.
• Strong third-quarter 2025 results, with adjusted EPS of $1.64 (up 27% year-over-year) and core sales growth of 5.6%, underscore operational excellence and pricing power in a dynamic macroeconomic environment.
• The company's full-year 2025 adjusted EPS guidance of $5.75-$5.95, reflecting 20% year-over-year growth at the midpoint, demonstrates confidence in its robust backlog, consistent execution, and strategic initiatives.
• Crane maintains a strong balance sheet with substantial M&A capacity, positioning it for continued inorganic growth and capital deployment in high-value industrial technology markets.

A Legacy Forged, A Future Engineered

Crane Company, founded in 1855, has evolved into a focused leader in engineered industrial products, operating primarily through its Aerospace & Electronics and Process Flow Technologies segments. This transformation has been a deliberate journey, strategically repositioning its portfolio towards higher-growth, higher-margin markets. The company's operational backbone, the "Crane Business System" (CBS), is a foundational and holistic operating system that enables data-driven decisions, rapid adaptation to unforeseen events, and disciplined execution. This system, coupled with a performance-based culture, is a key differentiator, allowing Crane to consistently outperform its markets.

In the competitive landscape, Crane carves out a niche against larger, more diversified industrial conglomerates such as Honeywell International (HON), Emerson Electric (EMR), Parker Hannifin (PH), and Dover Corporation (DOV). While these competitors often boast broader scale and extensive R&D budgets, Crane's strength lies in its specialized, mission-critical applications, deep customer relationships, and robust aftermarket support. Its diversified portfolio provides resilience across various end markets, a crucial advantage in volatile economic cycles. The company's focus on engineered solutions for specific, demanding applications often translates into superior product performance and customer loyalty, particularly in defense and specialized industrial sectors.

Broad industry trends are currently playing into Crane's strengths. The aerospace sector is experiencing a robust recovery, driven by increasing commercial aircraft build rates and elevated aftermarket activity. Defense spending remains solid globally, fueled by geopolitical uncertainties and a focus on reinforcing industrial bases. Emerging trends like the renewed global investment in nuclear energy, the burgeoning demand for power from AI and data centers, and the rapid expansion of the cryogenics market all present significant growth avenues that align with Crane's strategic focus.

Technological Edge and Innovation: The Core of Crane's Moat

Crane's competitive moat is deeply rooted in its differentiated technology, which provides tangible and often quantifiable benefits over alternatives. In the Aerospace & Electronics segment, Crane supplies critical components and systems for "tough and mission-critical environments." This includes advanced pressure sensors for aircraft engine control, sophisticated aircraft braking systems for commercial and fighter jets, and flexible power conversion solutions for defense and space applications. These technologies are designed for industry-leading size, weight, and performance capabilities, crucial for next-generation military radars and more electric tactical military vehicles. For instance, the company is actively winning funded next-generation military demonstrator programs for brake control systems and advancing vehicle electrification solutions, including a new 200-kilowatt traction motor inverter generator controller. Crane was also selected to supply the door signal system for the COMAC C929 widebody aircraft, a program that will incorporate nearly 100 proximity sensors per shipset. The F-16 brake control upgrade program is on track to generate a $30 million annual revenue run rate starting in 2026, with a total program life of $150 million to $200 million, including foreign military sales.

The Process Flow Technologies segment is a provider of highly engineered fluid handling equipment for applications demanding high reliability. Its offerings include specialized on/off valves for critical applications in chemical, oil & gas, and power industries, as well as pumps for water and wastewater. Innovation is continuous, as evidenced by the introduction of the high-efficiency SyFlo wastewater pump, featuring advanced non-clog and pellet technology, with shipments commencing in the third quarter of 2025. In cryogenics, Crane maintains a leadership position as a supplier of vacuum insulated pipes for space launch platforms, leveraging its front-end engineering support and manufacturing capability as a key differentiator. The company's pharmaceutical offerings include high-temperature resistant diaphragm valves with EX technology, enabling it to secure significant wins in a competitive market.

A pivotal move to further enhance its technological differentiation is the pending acquisition of Precision Sensors & Instrumentation (PSI) from Baker Hughes (BKR). This $1,150 million acquisition, expected to close by year-end 2025 or early 2026, brings three iconic brands: Druck, Panametrics, and Reuter-Stokes. Druck strengthens Crane's pressure-sensing capabilities across aerospace applications and expands its presence in ground-based test and calibration equipment. Panametrics, a pioneer in ultrasonic flow technology, adds advanced ultrasonic flow meters and precision moisture analyzers, renowned for their highest accuracy in critical process industries like chemical production, LNG transportation, and cryogenic gas storage. Reuter-Stokes will double the capabilities of Crane Nuclear, bringing industry-leading radiation sensing and detecting technologies, enhancing offerings for nuclear plant operations and homeland security, and positioning Crane to capitalize on renewed global investment in nuclear energy, including small modular reactors. This acquisition is expected to be accretive to Crane's financial profile and achieve a double-digit return on invested capital by year five.

These technological advantages create significant barriers to entry, allowing Crane to command premium pricing, secure long-term contracts, and maintain superior margins. The continuous investment in R&D and strategic acquisitions ensures that Crane remains at the forefront of these specialized markets, solidifying its competitive position and driving long-term growth.

A Disciplined Portfolio Transformation and Robust Financial Performance

Crane's strategic evolution has been marked by disciplined portfolio management. On January 1, 2025, the company completed the divestiture of its Engineered Materials segment for approximately $208 million, recognizing a pre-tax gain of $43.50 million. This move further streamlined operations, allowing for a sharper focus on the higher-growth A&E and PFT platforms. This follows a decade-long effort to reposition the PFT segment, increasing its exposure to high-growth markets like chemical, pharmaceuticals, water and wastewater, and cryogenics from approximately 30% in 2017 to over 60% by 2024, with a mid-term target of 70%. Acquisitions like CryoWorks and Technifab Products, Inc. in 2024, which added approximately $55 million in revenue, have been instrumental in establishing Crane's leadership in cryogenics vacuum jacketed pipe. The pending PSI acquisition, with expected 2025 sales of approximately $390 million, represents the latest and most significant step in this ongoing portfolio transformation.

The company's financial performance reflects the success of this strategy and the effectiveness of the Crane Business System. For the third quarter of 2025, Crane reported net sales of $589.20 million, an increase of 7.5% year-over-year. Operating profit surged by 19.6% to $118.40 million, driving adjusted earnings per share (EPS) to $1.64, a 27% increase compared to the prior year. Year-to-date through September 30, 2025, net sales reached $1,724 million, up 8.6%, with operating profit climbing 19.6% to $322.40 million. Net income from continuing operations attributable to common shareholders for the nine months ended September 30, 2025, was $250 million, a 26.3% increase from the prior year.

Segment-wise, Aerospace & Electronics demonstrated exceptional strength, with Q3 2025 sales increasing 13% to $270.20 million, almost entirely driven by organic growth. The segment's operating margin expanded by 160 basis points to 25.1%, primarily due to strong net pricing, solid productivity, and higher volumes. The backlog for A&E stood at a robust $1,054.10 million as of September 30, 2025, representing a 26.5% increase year-over-year. This growth was broad-based, encompassing commercial original equipment (OE), military OE, and aftermarket products, all showing strong demand.

The Process Flow Technologies segment also delivered solid results, with Q3 2025 sales of $319.0 million, up 3.2%. Its operating margin expanded by 60 basis points to 22.2%, driven by strong productivity, favorable mix, and net pricing, even amidst tariff headwinds. PFT saw particular strength in its municipal wastewater pump business, which is on track for double-digit growth, and its cryogenic business, which secured double-digit growth in new orders. A notable win included a $6 million pharmaceutical order for GLP-1 drug capacity expansion. While the chemical end market remained soft, it exhibited stability.

Crane's profitability metrics are healthy, with a trailing twelve-month (TTM) Gross Profit Margin of 30.97%, Operating Profit Margin of 18.02%, Net Profit Margin of 16.13%, and EBITDA Margin of 20.41%. These margins reflect the company's successful strategic shifts and operational discipline, positioning it favorably against competitors.

The company's liquidity and capital structure are exceptionally strong. Cash provided by operating activities from continuing operations significantly increased to $189 million for the nine months ended September 30, 2025, compared to $55.80 million in the prior year. To finance the PSI acquisition, Crane entered into a new credit agreement on September 30, 2025, providing a $900 million delayed draw term loan and a $900 million revolving credit facility. Post-acquisition, the company's net leverage is projected to be just over 1x, well below its targeted range of 2x to 3x, leaving substantial capacity for further strategic mergers and acquisitions. The 12% dividend increase announced in Q4 2024 further underscores management's confidence in Crane's financial strength and resilience.

Outlook and Strategic Trajectory

Crane Company's outlook for 2025 and beyond is one of continued profitable growth, driven by its strategic initiatives and robust market positioning. The company raised and narrowed its full-year 2025 adjusted EPS guidance to a range of $5.75 to $5.95, representing 20% growth at the midpoint compared to 2024. This guidance anticipates a total year-over-year sales increase of approximately 7% to 8%, comprising 4% to 6% core sales growth, a 1% to 2% benefit from acquisitions, and a 1% contribution from favorable foreign exchange. Operating profit is expected to improve, fueled by productivity gains, operating leverage on higher volumes, and favorable pricing net of inflation.

For the Aerospace & Electronics segment, sales are projected to increase in the low double-digit percentage range for 2025, with core growth leveraging at 35% to 40%. This is driven by a substantial improvement in the OEM business due to higher commercial aircraft build rates and continued high utilization of aircraft in both commercial and military aftermarket sectors. While commercial aftermarket growth rates are expected to decelerate in Q4 due to challenging comparisons, the overall trajectory remains strong. Preliminary indications for 2026 suggest A&E organic growth will be at the high end of its long-term 7% to 9% guidance range.

The Process Flow Technologies segment is expected to see sales increase in the low single-digit percentage range for 2025. This growth is primarily attributed to demand in the Water, Pharmaceutical, Industrial, and Cryogenic markets, partially offset by a generally softer chemical end market. Despite these headwinds, PFT is anticipated to achieve greater margin expansion as core volumes leverage at the higher end of its targeted range.

The pending PSI acquisition is a cornerstone of Crane's future growth. PSI is expected to be accretive to Crane's financial profile, both in terms of margins and growth, within the next few years, with a target of achieving double-digit return on invested capital by year five. Management's confidence in PSI's strategic outlook has only increased, and integration planning is well underway. The company's M&A funnel remains robust, with opportunities across both segments, and its significant financial flexibility positions it to continue deploying capital strategically.

Risks and Resilience

While Crane's outlook is strong, it operates in a dynamic environment with inherent risks. The company continues to anticipate a gross cost increase of approximately $30 million for 2025 due to tariffs, which it plans to offset through price and productivity initiatives. The deceleration in commercial aftermarket growth rates, while anticipated, presents a challenging comparative environment. The chemical market remains soft, and while stable, a clear inflection point for recovery is not yet evident.

Crane also manages legacy environmental liabilities at sites like Goodyear, Roseland, and Crab Orchard, for which it has indemnification obligations. However, the company has demonstrated resilience in managing such challenges. The impact of Hurricane Helene on its Marion, North Carolina facility in September 2024, for instance, resulted in $6.30 million in expenses for the nine months ended September 30, 2025, but these were largely offset by $9.10 million in property damage insurance proceeds and $6.70 million in lost profits insurance proceeds. Additionally, product liability lawsuits related to a 2021 chemical leak were settled by February 2025, with no material loss due to insurance coverage.

Conclusion

Crane Company stands as a compelling investment thesis, built on a foundation of strategic transformation, operational excellence through its Crane Business System, and a disciplined approach to inorganic growth. Its focused portfolio in Aerospace & Electronics and Process Flow Technologies, enhanced by proprietary technologies and strategic acquisitions like PSI, positions it for sustained market outperformance. The company's robust financial performance, characterized by strong sales growth, expanding margins, and exceptional cash flow generation, underscores its ability to execute effectively in complex environments. With a clear strategic roadmap, substantial M&A capacity, and a proven track record of managing risks, Crane Company is well-equipped to continue its trajectory of delivering exceptional returns for discerning investors. Its technological leadership in niche, mission-critical applications provides a durable competitive advantage, ensuring its relevance and profitability in an evolving industrial landscape.