Q1 2025 Crane Co Earnings Call
Company first quarter 2025 earnings conference call.
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Speaker Change: I would now like to turn the conference over to Alison Pollinium, Vice President of Investor Relations.
Alison Pollinium: Thank you operator, and good day, everyone welcome to our first quarter 2025 earnings release Conference call.
Alison Pollinium: Since linear vice president of Investor Relations.
Alison Pollinium: On our call. This morning, we have Max Mitchell, our chairman, President and Chief Executive Officer.
Alison Pollinium: Alex Alcoa.
<unk>, President and Chief operating officer.
Alison Pollinium: Rich Maue, our executive Vice President and Chief Financial Officer.
Seasonal Feldman: Along with seasonal Feldman senior Vice President Treasury, and Investor Relations, who was on for Q&A.
Alison Pollinium: We will start off our call with a few prepared remarks from Max and rich after which we will respond to your question.
Alison Pollinium: And just a reminder, the comments we make them on the call will include some forward looking statements. We refer you to the cautionary language at the bottom of our earnings release and also in our annual report 10-K, and subsequent filings pertaining to forward looking statements.
Alison Pollinium: Also during the call we will be using some non-GAAP numbers, which are reconciled to the comparable GAAP numbers and tables at the end of our press release and accompanying slide presentation, both of which are available on our website at www Dot Crane co dot com in the Investor Relations section now, let me turn the call over to Matt. Thank you Alison and thanks, everyone for joining.
Alison Pollinium: The call today.
Alison Pollinium: May you live in interesting times.
Alison Pollinium: Origins of the phrase or unknown, but we've all heard of used as a sarcastic euphemism for times of challenge and uncertainty.
Speaker Change: I think its intended more of a curse, but either way it's times like these that we prepare for it Craig.
Speaker Change: As a leader with a global diversified manufacturer in for my entire team what a fantastic time for us to continue to hone our strategic thinking processes for reacting to fast changing events and our ability to execute in an environment that's in constant flux.
Speaker Change: A experienced the whole team embraces and relishes in this environment as we continue to have the opportunity to grow through adversity.
Speaker Change: There are many potential scenarios for how the current dislocation progresses over the course of 2025 and beyond what's common across those scenarios is my strong belief the crane will emerge in an even stronger competitive position than when we entered this year.
Speaker Change: And off to a very strong start to 2025 adjusted EPS was $1 39, driven by an impressive seven 5% core sales growth, reflecting strength across both aerospace and electronics and process flow technologies.
Speaker Change: Core orders were also solid up 16% in the quarter driven primarily by the ongoing strength in our aerospace <unk> electronics business.
Speaker Change: Process flow technologies also ahead of our expectations.
Speaker Change: As we exited 2024, we had a very positive outlook for 2025, given the expectation of executing successfully on our strategy and growth initiatives, along with favorable macroeconomic outlook as.
Speaker Change: As the quarter progressed, we gained confidence in a path to exceed the guidance. We provided in January however, given recent economic developments policy decisions outside of our control the balance of the year is likely to unfold differently than we had anticipated.
Speaker Change: Despite that uncertainty.
Speaker Change: Based on the current inflationary pressures and demand and supply chain environment that we see today.
Along with our best analysis of the risks and opportunities ahead.
Speaker Change: Of the year for US we are comfortable comfortable reaffirming our full year 2025, adjusted EPS outlook in the range of $5 30 to $5 60.
Speaker Change: Our outlook reflects our views based on current economic conditions, and we will of course adjust that outlook if needed based on any updates or changes to trade policy or any incremental changes in the demand environment.
Speaker Change: Assumptions underlying this guidance range are based on the current conditions known and face today, including tariffs continuing throughout the balance of the year.
Speaker Change: If you believe the situation will improve faster there is upside to the midpoint of our range.
Speaker Change: At this point based on what we know we believe that we can still achieve the low end of our guidance range with a modest deterioration of demand or slight worsening of the trade environment.
Speaker Change: While factors outside our control our dynamic crane remains extremely well positioned to outgrow our markets to deliver above market returns in the long run.
Speaker Change: We are confident in our strategic direction and our execution capabilities.
Speaker Change: We last met with many of you in early March for an Offsite Investor day at our Fort Walton Beach, Florida Defense power facility.
Speaker Change: <unk> delivers the most advanced high power conversion technologies with industry, leading size weight and performance capabilities for defense applications, including ground based east of radars and more electric tactical military vehicles among other applications that.
Speaker Change: That business is winning every day with an 11% sales CAGR expected for the decade from 2021 through 2030.
Speaker Change: During that visit you heard and saw the power of the machine that Crane is built into our holistic business system focused on strategic execution and innovation to support our customers along with a rigorous cadence and discipline of delivering on results that touches every aspect of the business.
Speaker Change: From our intellectual capital processes to commercial excellence and operational continuous improvement, which you all saw firsthand.
Speaker Change: And our results in the quarter reflect what we conveyed in.
Speaker Change: In addition, we described in detail a deeper understanding of our business system and the context of new acquisitions, and how we add value to businesses, we acquire and are very active and detailed integration process and.
Speaker Change: And we are actively working opportunities today, we have not slowed down in any way in the present environment.
Speaker Change: The strength of our underlying business, our strategy and our capabilities in both operational execution, the commercial excellence, coupled with an extremely strong balance sheet positions.
Speaker Change: Positions us extremely well to continue driving above market growth, both organically and through acquisitions.
Speaker Change: I want to thank all of you for going out of your way to visit with Us in Florida and our team enjoyed welcome you welcoming you to the machine of being Crane and hopefully encouraging some of you listen to some classic Big Florida.
Speaker Change: Now, let me pass it over to our Chief operating officer, Mr. Alex Alcoa to provide some color on the current environment.
Speaker Change: Thanks, Matt Yes.
Speaker Change: Yes, our teams are having great fun.
Speaker Change: I must admit I wish we can enjoy a few moments of boring and repetitive.
Speaker Change: Before I get into the segments, let me provide some insights into our tariff exposure.
Speaker Change: Overall about 7% to 8% of our cost of goods sold consistent materials and components that are directly imported into the United States.
Speaker Change: Another 3% to 4% of cost of goods sold our intercompany sales into the United States.
Speaker Change: <unk> with its except from tariffs.
Speaker Change: Our direct imports into United States are skewed somewhat towards process flow technologies with.
Speaker Change: With aerospace and electronics, relying more heavily on our U S supply base.
Speaker Change: Our profit flow technologies, the largest exposure to China.
Speaker Change: Where we procure a buyout valves pumps castings and motors.
Speaker Change: However, our total China exposure is well below 3% of total cost of goods.
Speaker Change: The other notable exposures for PSD, our India, primarily related to casting and Thailand, primarily for machine parts.
Speaker Change: Neither of those exposures, we just 1% of <unk> total cost of sales.
At Aerospace <unk> electronics, the primary source of important in Malaysia.
Speaker Change: Largely related to printed circuit board and only 1% to 2% of total cost of sales for crane overall.
Speaker Change: While much smaller any thus also important wire harnesses machine parts and power sources from a number of countries, none of which is particularly material.
Speaker Change: We expect to offset the majority of the potential tariff impact.
Speaker Change: Price and productivity.
Speaker Change: We have demonstrated consistently differentiated execution through cycles with this leadership team.
Speaker Change: The cadence and discipline of our Crane business system, our machine along with our performance based culture.
Speaker Change: Our even more valuable in times like these.
Speaker Change: As they enable us to make data driven decisions quickly with flexibility to adapt as conditions change and with accountability.
Speaker Change: We will manage through this dislocation and expect to emerge even stronger.
Speaker Change: Now some thoughts on the segments.
Speaker Change: Starting with aerospace and electronics.
Speaker Change: There is no material change in end market conditions relative to our prior expectations.
Speaker Change: Aerospace remains a very strong demand environment.
Speaker Change: On the commercial side of the business activity remains healthy with Boeing continuing to ramp up production and aftermarket activity continuing at elevated levels.
Speaker Change: On the defense side, we continue to see solid procurement spending.
Speaker Change: And our continued focus on reinforcing the broader defense industrial base, given tightening global uncertainty today.
Speaker Change: Okay.
Speaker Change: Looking ahead to the balance of 2025.
Speaker Change: <unk> to anticipate core sales growth for the year to be up mid to high single digits with that growth leveraging that 35% to 40%.
Speaker Change: That guidance assumes continued strong sales with the ramp up of Boeing offset by decelerating year over year growth rate in commercial aftermarket.
Speaker Change: We have previously highlighted.
Speaker Change: As our comparisons become more challenging.
Speaker Change: Pointing out that this is our sixth quarter of double digit commercial aftermarket growth.
Speaker Change: That as we talked about when we last reported or naturally moderate overtime.
Speaker Change: We continue to see above cycle growth of this segment for the remainder of this decade.
Speaker Change: We also continue to pursue new opportunities and win new business across the segment.
Speaker Change: For example in the quarter, we won additional new content on the XM 30, optionally manned fighting vehicle demonstrator program with our defense power solution.
Speaker Change: As we have discussed in the past, we are very well positioned with <unk>.
Speaker Change: Carlos or which of the defense primes is awarded the program.
Speaker Change: And we are further improving our position.
Speaker Change: And our sensing and power systems business.
Speaker Change: We were recently awarded contract and funded engineering development work on the Bell B 280.
Speaker Change: Dose <unk> Echo and unmanned ANV aviation platform, all great programs, where we see significant growth over the next decade.
Speaker Change: While still early in the development process we.
We remain actively engaged with engineering teams at our key customers on the technical architecture for the next generation single aisle aircraft.
Ensure that our technology roadmap and development plans are aligned with our customer needs.
Speaker Change: And really impressive performance by our by our landing solution team that completed flight test hardware for a leading unmanned fighter aircraft program.
Speaker Change: And a record six month timeframe.
It's unprecedented for an anti skit brakes system could be developed that quickly.
Speaker Change: Positioning us well for future opportunity.
Speaker Change: A perfect example of the machine at work in engineering.
Speaker Change: Outstanding work by our team.
Speaker Change: Very confident for yet another outstanding year at aerospace and electronics.
Speaker Change: Yes.
Speaker Change: At profit flow technologies.
Speaker Change: We remain well positioned to outgrow our markets across cycle.
We have systematically we position our portfolio around our core end markets, including chemical pharmaceuticals, water and wastewater cryogenic and industrial automation.
Speaker Change: These are higher growth end markets and these are the markets, where we have the strongest competitive position and the most differentiation.
Speaker Change: Enabling sustainable market outlook.
Speaker Change: We remain focused on investing for growth over the long term with continued execution against our multiyear technology and new product development roadmap.
Speaker Change: As well as commercial excellence initiative.
All enabled by our consistent operational execution.
Speaker Change: Tactically, we have proven our ability to react to any changes in demand quickly and we will remain nimble during this period.
Speaker Change: Any necessary and appropriate price cost measures.
Speaker Change: However, our strategy is unchanged.
Speaker Change: We will manage through any potential demand fluctuations without losing focus on our longer term goals and objectives.
Speaker Change: Looking ahead to the balance of 2025.
Speaker Change: Our line of sight today, we still anticipate positive core growth for.
Speaker Change: For the year.
Speaker Change: A few notable wins in the quarter included significant customer approval for one of our new Saunders pharmaceutical valve with a key target customer.
Speaker Change: This approval was a critical step for the business and we continue to drive share gains with new product development and we are seeing great progress.
Speaker Change: We were awarded a $5 $7 million project for line pipe and line valves for a Saudi Arabian mining company that is working to develop a third complex in Saudi Arabia for fertilizer production capacity.
Speaker Change: Localized site was key to secure this order.
Speaker Change: We continue to build out our capabilities in cryogenic space.
Speaker Change: Both the prior work that <unk> acquisition from last year, which are now working closely with our organic initiatives to expand our portfolio of cryogenic valve and vacuum jacketed pipe.
Our combined platform is continuing to grow at a strong pace.
Speaker Change: And in the quarter, we had some significant wins.
Speaker Change: Particularly baselines customer.
Speaker Change: So our businesses remain well positioned to continue to deliver great results.
Speaker Change: We still expect to significantly add those we sold to add to those results with acquisition.
Speaker Change: We have a very strong balance sheet today with at least $1 5 billion of M&A capacity.
Speaker Change: We also have a robust pipeline of potential acquisition.
Speaker Change: M&A activity has not slowed down at all.
Speaker Change: The deals we are working on today include a number of opportunities in both aerospace and electronics as well as process flow technologies.
Speaker Change: And they range from the small sub $100 million deals like those we completed last year.
Speaker Change: Many times that size.
Speaker Change: We mentioned our rigorous process the machine for acquisition integration and creating value from any business.
Speaker Change: We have just as robust a process for M&A opportunity identification and due diligence and I'm optimistic about our prospects of deploying capital this year on some great opportunities.
Speaker Change: I also wanted to share some takeaway from our recent annual senior leadership conference.
Speaker Change: About 200 of claims most senior associates spend three days at Ges Crotonville training facilities to share best practices and to keep our global teams around the world connected.
Speaker Change: Three days to focus on reinforcing the machine that delivers results at crane.
Speaker Change: I remember my first senior leadership meeting shortly after I joined <unk> in 2013.
Speaker Change: A great few days, but heavily focused on operational execution, only which was needed and.
Speaker Change: And the focus in those days, we were very good then, but so much better today.
Speaker Change: Last month however.
Speaker Change: Focus with everything we're doing to drive growth and commercial execution.
Speaker Change: Sharing the best practice examples across crane.
Speaker Change: Our long term technology and product Roadmaps commercial excellence tools simplification initiatives and strategic pricing.
Speaker Change: It was followed by training on new enhancements to our profit for strategy development.
Led by some Gaza VSAT, we joined <unk> last year to meet our process flow technologies segment.
Speaker Change: A powerful few days and I'm incredibly proud of our teams around the world who have made so much progress and have the momentum to continue to do so.
Speaker Change: Taking all of this together.
Speaker Change: Just a lot of really exciting initiatives at crane.
Speaker Change: All reinforces our confidence that regardless of the current environment over the long term.
Speaker Change: We will deliver a 4% to 6% long term core sales growth rate through cycles from resilient and durable businesses with solid aftermarket.
Speaker Change: Substantial operating leverage on top of our already solid margins today.
Speaker Change: It should lead to double digit average annual core profit growth with potential upside from capital deployment.
Speaker Change: And with virtually no net debt at capital deployment opportunity is significant.
Rich Maue: Now, let me turn the call over to our CFO, Mr. Rich maue for more specifics on the quarter.
Rich Maue: Thank you Alex and good morning, everyone starting off with total company results, we drove seven 5% core sales growth in the quarter with strength across both segments.
Rich Maue: Adjusted operating profit increased 18% driven by volumes solid net price and productivity.
Rich Maue: In the quarter core FX neutral backlog was up 12% compared to last year, driven by outsized strength at aerospace and electronics and core orders were up 16% compared to last year as well also driven by aerospace and electronics, but also modest growth in process flow technologies that was a bit.
Rich Maue: Ahead of our expectations.
Rich Maue: Further we are in a net cash position and have more than $1 5 billion in debt capacity today for M&A.
Rich Maue: A few more details on the segments in the quarter, starting with aerospace and electronics sales of $249 million increased 10% in the quarter with all of that growth organic.
Rich Maue: And even with the continued high level of sales growth, notably our record backlog of $960 million increase even further of 21% year over year and up 11% sequentially.
Rich Maue: Total aftermarket sales increased 20% with commercial aftermarket sales up 19% and military aftermarket up 24%.
Rich Maue: And OEM sales increased 6% in the quarter with 10% growth in commercial and up 1% and military.
Rich Maue: Adjusted segment margin of 26% a record high for this segment increased 360 basis points from 22, 4%.
Rich Maue: Last year, primarily reflecting higher volumes price net of inflation and productivity.
Rich Maue: Our process flow technologies in.
Rich Maue: In the quarter, we delivered sales of $309 million up 9% driven by solid core sales growth of 5% in the quarter, along with a 5% benefit from the cryo works in tech the fab acquisitions offset by one point of unfavorable foreign exchange.
Rich Maue: Compared to the prior year core FX neutral backlog decreased 6% and core FX neutral orders were up 2% both impacted by project timing you might recall. The notable project wins, we highlighted in Q1 of last year.
Rich Maue: And on a sequential basis core FX neutral orders were up 10% compared to the fourth quarter.
Rich Maue: Adjusted operating margin of 29% expanded 10 basis points.
Rich Maue: Importantly, core operating leverage was 35% at the high end of our 30% to 35% targeted range.
Rich Maue: As you all know Leverages always impacted in particular in the first year of an acquisition, which was the case in this quarter.
Rich Maue: The strong overall performance was driven by productivity strong net price and the higher volumes.
Rich Maue: Below the segments. Some of you may have also noticed that adjusted corporate expense was about 25 million in the quarter, which is higher than the quarterly average you would expect this is related to accounting rules that require accelerated amortization of stock compensation expense for associates that are retirement eligible so stock compensation expense will be.
Rich Maue: Much higher than the first half and lower in the second half, we still expect $80 million of corporate costs for the full year.
Hey, all of the comments on today's call regarding the uncertain environment ahead.
Speaker Change: Minded me of a quote from the classic and timeless romantic drama Dodge ball when.
Rich Maue: When a great character patches of Houlihan played by the late Rip torn was preparing the team and practices said.
Speaker Change: You can Dodge a wrench you can Dodge a ball.
Speaker Change: There have certainly been a few wrenches thrown around to start the year and our our team is doing an outstanding job dodging them. So far I personally only have a couple of lumps.
Speaker Change: And with that operator, we are now ready to take our first question.
Speaker Change: Thank you the floor is now open for questions. At this time, if you have a question or comment. Please press star one on your telephone keypad. If at any point. Your question is answered you may remove yourself from the queue by pressing star two.
Speaker Change: Again, we ask that you please pick up your handset when posing your questions Kim.
Speaker Change: Can you provide optimal sound quality.
Speaker Change: Thank you our first question will come from Damian crash with UBS. Your line is open.
Speaker Change: Thank you.
Hey, good morning, Max and Rich Hope you cannot <unk> is about to come your way.
Speaker Change: [laughter] Thanks, Dave.
Speaker Change: Yeah No I appreciate all the details around your main character exposures maybe.
Speaker Change: Maybe you could just give us a little bit more clarity on the updated guidance.
Speaker Change: What extent is.
Speaker Change: Rice contributing to your sales guide at this point.
Speaker Change: And just kind of considering the strength of the first quarter orders in that uptick in backlog is it fair to assume that that's longer lead time backlog, that's really more 2026 and beyond.
Yes, so Damian just maybe.
Speaker Change: Hit your first your first question first on price.
Speaker Change: Expect to see somewhere in the vicinity of about 3% overall more heavily weighted to PFG for sure.
Speaker Change: Perhaps a little bit higher in the PMT segment, a little lower in A&D.
Speaker Change: So just overall, that's what we would expect.
Speaker Change: For us to offset.
Speaker Change: The majority or most of the tariff impact.
Speaker Change: As it relates to the backlog, maybe just a little bit of color to provide there certainly aerospace and electronics was significant overall in the quarter and the growth in the backlog.
Speaker Change: Fairly broad base maybe.
Speaker Change: Maybe some color aftermarket continues.
Speaker Change: To be fairly strong as you saw Alex mentioned also the comps in the latter part of the year, but aged fleet continues to be dynamic.
Speaker Change: Our signature in the market space retirement is not happening at the levels that would cause you to believe a significant decline in aftermarket. So we feel good about the bill that's happened in aftermarket.
Speaker Change: And then on OE. It was really a combination of both commercial and.
Speaker Change: And defense from an orders point of view on commercial obviously the build rates are continuing.
Speaker Change: And and widespread there as well right in between.
Speaker Change: Boeing Airbus and Comat frankly in the quarter defense to your point, a little bit Theres. Some theres some multi year orders in there too. So it gives us even further confidence in 2026 already.
Speaker Change: So a few a few multi year orders that contributed to the strength in the quarter, but in terms of the guide in relation to the guide and the strength of the backlog, yes, it's related to the length of those orders.
Speaker Change: Reading through beyond 25.
Speaker Change: Rich.
Speaker Change: Okay got it that makes total sense.
Speaker Change: Then.
Speaker Change: Follow up to some of those comments on defense I mean within A&D.
Speaker Change: If you look at some of the details about 150 billion dollar defense package.
Speaker Change: Conciliation.
Speaker Change: Any items that kind of stand out to you is as you know.
Speaker Change: Crane programs our growth drivers in the future.
Speaker Change: Yes, I would say just overall you know we have such a broad exposure Damian across defense platforms, whether it's fixed wing, even even rotary we even so we saw some nice aftermarket demand on rotary actually in the quarter.
Speaker Change: The CH 47 on aftermarket, but overall from a spend point of view, whether it's munitions or aircraft or radar applications. As you know where we have a particular strength, we feel really good about.
Speaker Change: The approvals and where we see spend being allocated as we.
Speaker Change: As we look forward into 'twenty six similar themes as rich was just mentioning.
Speaker Change: Callout emissions replenishment. Unfortunately in this global environment.
Speaker Change: Aging military upgrades, that's a key theme I would say electrification is another key theme for the future.
Speaker Change: Which we highlighted at Investor day also so so those are some of the some of the major.
Somatic drivers that we continue to see.
Speaker Change: Strength through the decade.
Speaker Change: Understood. Thanks again, good luck out there I'll pass it along.
Thanks, David and thanks Ben.
Speaker Change: Thank you. Our next question will come from Scott <unk> with Deutsche Bank. Your line is open.
Scott: Hey, good morning.
Speaker Change: Scott.
Speaker Change: Rich can you characterize the growth split between volume and price that you saw in A&D this quarter.
Rich Maue: Yes, it was roughly 50 50 so.
Speaker Change: Right almost right down the middle.
Speaker Change: Okay and was commercial OE contributing three material materially to the pricing gains in the segment experienced.
Speaker Change: Yeah.
Speaker Change: Yes, I don't have the full breakout of that but certainly we've been making nice progress on certain areas in commercial OE, but.
Speaker Change: Clearly there has been whether it's from existing contracts with index increases or.
Speaker Change: <unk> that we might have made.
Speaker Change: In response to the contracts that needed to be addressed but.
Speaker Change: I don't have a specific breakout, but it was pretty pretty healthy I would say across both aftermarket and commercial.
Speaker Change: Okay, just to clarify any major commercial OE lta's reprice. This quarter that you didn't have repriced last quarter I'm, just trying to understand that sequentially the growth in A&D.
Speaker Change: <unk>.
Speaker Change: No.
Speaker Change: No.
Speaker Change: Okay.
Rich Maue: And then rich consensus has EBIT dollars down at any over the remainder of the year versus what you just reported in any of this quarter.
Speaker Change: I guess you know.
Speaker Change: Is this environment of uncertainty, but is there any discrete reason why you would think that would be the case in EBIT dollars to decline.
Speaker Change: Yes.
Speaker Change: Yeah. So I would say is that in the quarter, we had a very strong quarter overall as you saw with the leverage at 60% and in A&D.
Speaker Change: Had decent mix, we had strong engineering sales completing a few I think major development programs that had some nice margin to them.
Speaker Change: So a few things is what I would say added up overall in the quarter that contributed to that 60%.
Speaker Change: Alex mentioned in his prepared remarks that the comps will start to kind of move down.
Speaker Change: <unk>.
Speaker Change: But overall.
Speaker Change: Theres nothing that would suggest any sort of overall.
Speaker Change: Weakening to any significant degree there was perhaps just a few items in the quarter that we benefited from.
Speaker Change: Okay, and as Commack still taking delivery of the <unk> 909, even though with for talent to returns for him.
Speaker Change: Yes, thanks for that question, because Alex we actually met with Commack, a couple of weeks ago to look at the ramp up and everything is moving forward very smoothly.
Speaker Change: A big.
Speaker Change: Ramp up.
Speaker Change: <unk> of this year and they're on track they are still taking deliveries emphasize the importance of staying on track.
Speaker Change: The aftermarket as well so everything progressing quite well as you know we have a really strong position with that 909 platform.
Speaker Change: And they are also in the development of the 92, 9% to wide body, which we expect to also have a <unk>.
Speaker Change: <unk> position, our team's doing a great job.
Speaker Change: A lot of our team members were in China last week.
Speaker Change: And.
Speaker Change: All looks positive from that regard.
Speaker Change: Okay. Thank you I'll pass it along thanks.
Scott: Hey, Scott.
Speaker Change: Thank you. Our next question will come from Jeff Sprague with vertical research partners. Your line is open.
Speaker Change: Thank you good morning, Hey, good morning, Max High level, one for you first and then a couple of detailed questions.
Speaker Change: In your opening commentary just talking about emerging stronger into life.
Speaker Change: Was that just kind of an overarching view that kind of sweating the organization exercising the muscle trial by fire. It makes you better or do you actually see some places maybe where you have competitive footprint advantage or other advantages versus competitors that you might be able to leverage share both Jeff both I think any time there.
Do you exercise like this it sharpens the sword, but the others were seeing some opportunities where our competitors are positioned for some decisions that theyre, making that we think we have some openings.
Speaker Change: With respect okay, great and then just on the tariffs again.
Speaker Change: So I think it was 7% to 8% of Cogs.
Speaker Change: Call, It 100 million or so run rate.
Speaker Change: Didn't follow quite what Alex was getting at with the additional three to four inter company was that kind of a U S. MCA comment and not a cost headwind or maybe you could just elaborate on what that meant and whether I'm right on that roughly $100 million.
Speaker Change: Yes.
Speaker Change: Yes. Thank you.
Speaker Change: Thank you for the question you had $100 million.
Speaker Change: Related to direct imports from external suppliers and there's another three or 4% of inner unit.
Speaker Change: Some of that is because of the U S MCA.
Speaker Change: From a unit shipments.
Speaker Change: But those those are the imports that's not the tariff impact that we expect in our P&L.
Speaker Change: To that.
Speaker Change: The overall the tariff impact is more around the $60 million range for this year.
Speaker Change: Considering.
Speaker Change: All factors indirect.
Speaker Change: Impact on suppliers and Thats, mostly on the PFT side, because as you know our aerospace business is very heavily sourced domestic right.
Speaker Change: So we'll call it 100 million or so direct.
Speaker Change: Annualized $60 million on a year basis.
Alex Alcoa: And then just maybe one other one for you Alex just.
Alex Alcoa: Where you might see some demand risk in your business I'm kind of thinking can write those guys are cutting capex and cutting prices are declining.
Speaker Change: Is that where are you hedged your guide from a demand standpoint, and maybe if there was other verticals within PFT that you'd want to address.
Speaker Change: Yes, Jeff so in PSP rethink about the.
Speaker Change: The MRO side on the project side so.
Speaker Change: Across all vertical so I think the MRO side, usually when there's softness remains somewhat consistent and that's all about.
Speaker Change: The project activity and shifting to the right so on the chemical side.
Speaker Change: What we've seen.
Speaker Change: Last year and this year different dynamics by region U S continue to move Middle East continuing to move forward Europe softening.
Speaker Change: We did start hearing customers thinking about delaying decisions trying to see how this tariff points out. So we did make assumptions on projects shifting to the right in particular in the chemical.
Speaker Change: In the United States, but also in other regions.
Speaker Change: Among the Arizona, where there are.
Speaker Change: Our guidance.
Speaker Change: Thank you and then one quick one for rich.
Speaker Change: FX is still guiding minus one it sounded like the drop in a couple of pennies in your back pocket there maybe.
Speaker Change: Was that essentially 30 rates or maybe you could update us on on that yes, it's exactly it's exactly what it is we just hung in there they're not going to all the changes that can happen there and so we just stuck with 330 rates, yes, theres been some favorability here, we will see it but if it sticks, but your hunch is correct.
Speaker Change: Couple of things in my pocket.
Speaker Change: Thank you our next step.
Speaker Change: Our next question comes from Nathan Jones with Stifel. Your line is open.
Nathan Jones: Good morning, good morning, everyone.
Nathan Jones: And in the spirit of jokes I want to say that I wish I was bad but I do wish you were here.
Nathan Jones: Good I like.
Nathan Jones: Like that.
Nathan Jones: I guess first question is on supply chain.
Nathan Jones: During Covid there was obviously a lot of supply chain disruption you guys are components that go into other systems.
Nathan Jones: It'd be less concerned about your ability to manage your supply chain and more concerned about people, who who supply into those same projects being able to manage their supply chain.
Nathan Jones: Do you see any risk to any of the any parts of the business that could arise just from other.
Nathan Jones: Impacts on on.
Nathan Jones: Other supplies supply chains that could impact your ability to or your customers ability to finish projects and take delivery of products similar to maybe what happened during guidance.
Alex Alcoa: Yes, Nathan Thanks for questions is Alex So I think you have to think about separately from <unk> perspective on the PSP side I would not expect anything significant that supply chain is return since.
Nathan Jones: Since last year or two normal rates.
Alex Alcoa: <unk>.
Alex Alcoa: Stable.
Alex Alcoa: Of course, the shipment lanes and things like that from Asia are getting clogged up until fourth but I would not expect any.
Alex Alcoa: Significant change in supply chain ability to deliver on that side I think on the A&D side too.
Alex Alcoa: Through here the first month, we saw pretty stable.
Alex Alcoa: Slightly improving.
Alex Alcoa: Everybody saw in the news the issues with the Sps fastener facility in the Chicago Museum foundry that did not directly impact us.
Alex Alcoa: That said.
These.
Alex Alcoa: Some companies try to adjust their supply chain.
Alex Alcoa: And the tariffs.
Alex Alcoa: Help right supply chain improvement in aerospace for sure.
Alex Alcoa: So we would expect some lead time extensions as people get out of certain regions I'm trying to get at others and capacity constraints from some suppliers from that movement.
Alex Alcoa: In supply chain.
Alex Alcoa: But we're not seeing any major disruption caused by that and we're planning for some of those take time to in some areas to be extended and nuts.
Alex Alcoa: What we factored in as well.
Speaker Change: Thanks for that I guess my second question, you talked about <unk> as being a bit stronger than you'd anticipated in the first quarter to get to the question. There is do you think customers would pre positioning ahead of tariff related price increases and then did you guys.
Speaker Change: Preposition, Jimmy inventory in front of payers during the first quarter yourselves.
Speaker Change: Yeah. Good question on the inventory no we don't.
Speaker Change: We have experienced that in these tariffs is narrower.
Speaker Change: They know were engineered to order is number the right inventory to try to play games. So from that standpoint, we did it.
Speaker Change: On the pre buy.
Speaker Change: We did hear some.
Speaker Change: Activity pre buy from distributors stocking a bit more not really significant I would say it's not material.
Speaker Change: Really what drove the better than expected there are some projects that had been tracking for a while now since last year that.
Speaker Change: Hit in the quarter that drove some of that favorability. So I would say a little bit of pre buy but not now.
Speaker Change: Not anything major.
Speaker Change: Great. Thanks, very much for taking my questions and I'll see you on the das side of the map.
Nathan Jones: Thanks Nathan.
Speaker Change: John.
Speaker Change: Yeah.
Speaker Change: Thank you once again, if you would like to ask a question you May press Star one on your telephone keypad at this time. Our next question will come from Ronald Epstein with Bank of America. Your line is open.
Speaker Change: Hey, Good morning, this is Jordan on for Ron.
Andrew: Andrew Hi, Jordan.
Speaker Change: Yes.
Speaker Change: Couple of questions first one for M&A have you guys seen any slowdown.
Speaker Change: In tools or pauses happening just because of the macro.
Speaker Change: No we haven't.
Speaker Change: <unk>.
Speaker Change: We haven't seen any slowdown.
Speaker Change: Very active for us.
Speaker Change: Okay.
Speaker Change: Then on Boeing's call little comment about the buffer stock.
Speaker Change: Having been eye to stabilize the supply chain and that it would go back down to normalized levels. You guys have been very good about controlling the inventory that you guys have in the channel.
Operator: Welcome to the Crane Company First Quarter 2025 Earnings Conference Call.
Hey, Good morning, this is Jordan on for Ron.
Speaker Change: Are you concerned at all though for other suppliers that you might be feeding into.
Operator: 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. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2.
Hi, Jordan.
Great.
Speaker Change: That would be getting destock.
Couple of questions first one for M&A have you guys seen any slowdown.
I mean, I think Boeing has done a great job being transparent on their inventory position with us I imagine with other suppliers as well. So we're very very well aligned to what they need and are expecting and we're planning to support that so our factories are well in tune and efficient.
Deals are positives happening just because of the macro.
We haven't.
We haven't seen any slowdown, let's say, it's very very active for us.
Operator: So others can hear your questions clearly, we ask that you pick up your headset for best sound quality. Lastly, if you should require operator assistance, please press star zero.
Okay and then.
Boeing's call the little comment about their buffer stock.
Speaker Change: To support that ramp up.
Having been high to stabilize our supply chain and that I would go back down to normalized levels you guys have been pretty.
Speaker Change: My understanding is that.
Allison Poliniak: I would now like to turn the conference over to Allison Poliniak, Vice President of Investor Relations. Thank you, operator, and good day, everyone. Welcome to our first quarter 2025 earnings release conference call. I'm Allison Poliniak, Vice President of Investor Relations.
Speaker Change: It's the same with many other suppliers that are well in tune with the blend of the inventory position and planning appropriately.
Good about controlling the inventory that you guys have in the channel.
Speaker Change: Okay got it. Thank you guys so much.
Are you concerned at all though for other suppliers that you might be feeding into.
Speaker Change: Thanks Jordan.
Speaker Change: Thank you. Our next question will come from Matt Summerville with D. A Davidson your line is open.
That would be getting destock.
Allison Poliniak: On our call this morning, we have Max Mitchell, our Chairman, President, and Chief Executive Officer, Alex Alcala, Executive Vice President and Chief Operating Officer, and Rich Maui, our Executive Vice President and Chief Financial Officer, along with Jason Feldman, Senior Vice President, Treasury, Tax, and Investor Relations, who is on for Q&A.
I mean, I think Boeing has done a great job being transparent on their inventory position with us I imagine with other suppliers as well. So we're very very well aligned to what they need and are expecting and we're planning to support that so our factories are walling tuna fish.
Speaker Change: Good morning, Matt.
Matt Summerville: Hey, good morning, just a couple of follow ups at $60 million I. Just wanted to clarify is that the mitigated number meaning that is the magnitude by which your Cogs are going higher all else equals is a result of the tariffs I just want to be clear on that.
To support that ramp up.
Allison Poliniak: We will start off our call with a few prepared remarks from Max, Alex, and Rich, after which we will respond to your questions. And just a reminder, the comments we make on this call will include some forward-looking statements.
Speaker Change: Yes that would be the gross the gross number right that we will substantially mitigate assuming these tariffs exist.
My understanding is that it.
It's the same with many other suppliers that are well in tune with the blend of the inventory position and planning appropriately.
Matt Summerville: The entire balance of the year no change.
Matt Summerville: Up or down.
Allison Poliniak: We refer you to the cautionary language at the bottom of our earnings release, and also in our annual report, 10-K, and subsequent filings pertaining to forward-looking statements.
Okay got it. Thank you guys so much.
Speaker Change: Got it.
Speaker Change: Thank you for that clarification, and then you talked to just very briefly on.
Jordan: Thanks, Jordan Thanks, Jordan.
Speaker Change: Thank you. Our next question will come from Matt Summerville with D. A Davidson your line is open.
Speaker Change: The chemical market with respect to PFG G. Maybe do a little bit more of a deeper dive in terms of what youre seeing across both the MRO and project side of the business geographic color around the major end market buckets and product lines that you guys typically referred to in that business.
Allison Poliniak: Also, during the call, we will be using some non-GATT numbers, which are reconciled to the comparable GATT 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.
Speaker Change: Good morning, Matt.
Speaker Change: Hey, good morning, just a couple of follow ups at $60 million.
Speaker Change: To clarify is that the mitigated number meaning that is the magnitude by which your Cogs are going higher all else equal as a result of the tariffs I just want to be clear on that.
Max Mitchell: Now, let me turn the call over to Max. Thank you, Allison, and thanks, everyone, for joining the call today.
Speaker Change: Yes, I mean for PST as you know chemical really strong position.
Max Mitchell: May you live in interesting times. The origins of the phrase are unknown, but we've all heard it used as a sarcastic euphemism for times of challenge and uncertainty. Some think it's intended more of a curse, but either way, it's times like these that we prepare for at Crane. As a leader of a global diversified manufacturer, and for my entire team, what a fantastic time for us to continue to hone our strategic thinking, processes for reacting to fast changing events, and our ability to execute in an environment that's in constant flux. In an experience the whole team embraces and relishes in this environment as we continue to have the opportunity to grow through adversity.
Speaker Change: Yes that would be the gross the gross number right that we will substantially mitigate assuming these tariffs exist.
Speaker Change: Yeah.
Speaker Change: <unk> globally, I think we went into the year with the expectation it's different by region and we saw that play out in Q1.
Speaker Change: The entire balance of the year no change.
Speaker Change: Up or down.
Speaker Change: So in the Americas, we saw positive growth.
Speaker Change: Got it.
Speaker Change: Thank you for that clarification, and then you talked to just very briefly on.
Speaker Change: On MRO and project activity.
Speaker Change: Our customers are expanding ground sides driving efficiency upgrades things of that nature of middle East similar.
Speaker Change: The chemical market with respect to PFG, maybe do a little bit more of a deeper dive in terms of what youre seeing across both the MRO and project side of the business geographic color around the major end market buckets and product lines you guys typically referred to in that business.
Speaker Change: <unk> investment in growth.
Speaker Change: Then since last year in Europe.
Speaker Change: Soft declining and that has continued.
Speaker Change: China as well somewhat soft in Asia Pac kind of mix.
Speaker Change: Yes, I mean for PST as you know chemical a really strong position.
Max Mitchell: There are many potential scenarios for how the current dislocation progresses over the course of 2025 and beyond. What's common across those scenarios is my strong belief that crane will emerge in an even stronger competitive position than when we entered this year. and off to a very strong start to 2025. Adjusted EPS was $1.39, driven by an impressive 7.5% core sales growth, reflecting strength across both aerospace electronics and process flow technology. core orders were also solid up 16% in the quarter, driven primarily by the ongoing strength in our aerospace electronics business, and with process flow technologies also ahead of our expectations.
Speaker Change: So.
Speaker Change: Hi, how are we closed our last year was the first four months of the year now going forward like I mentioned, we expect some of that project activity in the Americas to shift to the right.
Speaker Change: Have a substantial presence globally.
Speaker Change: Thank God, we went into the year with expectations different by region and we saw that play out in Q1.
Speaker Change: Some softening in demand versus what we saw in Q1 and that's what we.
Speaker Change: So in the Americas, we saw positive growth.
Speaker Change: They come to our guidance.
Speaker Change: On MRO and project activity.
Speaker Change: Customers are expanding brown side, driving efficiency upgrades things of that nature of middle East similar.
Speaker Change: Thank you for that Alex can you talk about some of the other end markets in that business as well, what youre seeing with cryo industrial automation water wastewater et cetera.
Speaker Change: Turning to investment and growth and then since last year in Europe has been soft declining and that has continued.
Speaker Change: The water wastewater in the quarter orders were strong up.
Speaker Change: China as well somewhat soft in Asia Pac kind of mix.
Speaker Change: So we feel good about that.
Max Mitchell: As we exited 2024, we had a very positive outlook for 2025, given the expectation of executing successfully on our strategy and growth initiatives, along with favorable macroeconomic outlook. As the quarter progressed, we gained confidence in a path to exceed the guidance we provided in January.
Speaker Change: Continuing cryogenic as has been our fastest growing.
Speaker Change: So.
Speaker Change: Hi, how are we close out last year. It was the first four months of the year now going forward like I mentioned, we expect some of that project activity in the Americas to shift to the right.
Speaker Change: Segment.
Speaker Change: Double digits, so that has been.
Speaker Change: Really exciting platform that we've added and continue to expand and gain share and take advantage of the market, that's driven by space launch activity.
Speaker Change: Some softening in demand versus what we saw in Q1, and that's what we baked into our guidance.
Max Mitchell: However, given recent economic developments, policy decisions outside of our control, the balance of the year is likely to unfold differently than we had anticipated. Despite that uncertainty, based on the current inflationary pressures and demand and supply chain environment that we see today, along with our best analysis of the risks and opportunities ahead of the year for us, we are comfortable, comfortable reaffirming our full year 2025 adjusted EPS outlook in the range of $5.30 to $5.60. Our outlook reflects our views based on current economic conditions and we will of course adjust that outlook if needed based on any updates or changes to trade policy or any incremental changes in the demand environment.
Speaker Change: Thank you for that Alex can you talk about some of the other end markets in that business as well, what youre seeing with cryo industrial automation water wastewater et cetera.
Speaker Change: Applications are used for the platforms that are being built out in various parts of the country.
Speaker Change: And then general industrial activity has in the first part of this year and a quarter of them.
Speaker Change: So water wastewater in the quarter orders were strong up.
Speaker Change: Up.
Speaker Change: So.
Speaker Change: I think overall a lot of positives in the first quarter.
Speaker Change: So we feel good about that.
Speaker Change: I think.
Speaker Change: Continuing cryogenic as has been our fastest growing.
Speaker Change: Partially offset by what I mentioned on chemical, particularly in Europe, and other parts of the world as well.
Speaker Change: Segment.
Speaker Change: Double digits, so that has been.
Really exciting platform that we've added and continue to expand and gain share and take advantage of the market. That's driven by space launch activity, where our applications are used for the platforms that are being built out in various parts of the country.
Rich Maue: Got it and then maybe just one final one rich.
Rich Maue: If you look out over the balance of the year is there anything that you would want to draw our attention to in terms of kind of the remaining earnings cadence as we move through Q2, three and four.
Max Mitchell: The assumptions underlying this guidance range are based on the current conditions known and faced today, including tariffs, continuing throughout the balance of the year. If you believe the situation will improve faster, there is upside to the midpoint of our reign. At this point, based on what we know, we believe that we can still achieve the low end of our guidance range with a modest deterioration in demand or slight worsening of the trade environment. While factors outside our control are dynamic, Crane remains extremely well-positioned to outgrow our markets and deliver above-market returns in the long run, and we are confident in our strategic direction and our execution capabilities.
Speaker Change: And then general industrial activity has in the first part of this year and the quarter has been.
Rich Maue: Yes, I think I think the high level would be.
Rich Maue: Looking at next quarter, just slightly down slightly.
Speaker Change: Finally up so.
Rich Maue: And then I would think of the full year is.
Speaker Change: I think overall a lot of positives in the first quarter.
Rich Maue: More.
Rich Maue: Equally weighted frankly first half second half.
Speaker Change: I think.
Speaker Change: Partially offset by what I mentioned in chemical particularly in.
Rich Maue: Overall.
Speaker Change: In Europe and other parts.
Rich Maue: Got it thank you.
Speaker Change: Other ones as well.
Rich Maue: Youre welcome.
Speaker Change: Got it and then maybe just one final one rich.
Speaker Change: Thank you. Our next question will come from Justin <unk> with CJS Securities. Your line is open.
Speaker Change: As you look out over the balance of the year is there anything that you would want to draw our attention to in terms of kind of the remaining earnings cadence as we move through Q2, three and four.
Max Mitchell: Hey, we last met with many of you in early March for an offsite investor day at our Fort Walton Beach Florida Defense Power Facility. That site delivers the most advanced high-power conversion technologies with industry-leading size, weight, and performance capabilities for defense applications, including ground-based AESA radars and more electric tactical military vehicles, among other applications. That business is winning every day with an 11% sales tagger expected for the decade from 2021 to 2030. During that visit, you heard and saw the power of the machine that Crane has built into our holistic business system, focused on strategic execution and innovation to support our customers, along with a rigorous cadence and discipline of delivering on results that touches every aspect of the business, from our intellectual capital processes to commercial excellence and operational continuous improvement, which you all saw firsthand.
Speaker Change: Good morning Joseph.
Rich Maue: Good morning.
Speaker Change: Question Theres been a bunch of headlines about travel being down given the political environment have you seen or do you expect to see that impacting your business at all.
Speaker Change: Yes, I think I think the high level would be as you're looking at next quarter, just slightly down down slightly.
Speaker Change: We're seeing the same headlines reading the same reports so we don't we're not seeing it read through I mean, I think this age fleet.
Speaker Change: And then I would I would think of the full year is more.
Speaker Change: Sure.
Speaker Change: Equally weighted frankly first half second half.
Speaker Change: There's still requiring the same level of maintenance.
Speaker Change: Overall.
Speaker Change: The market continues to be strong deliveries are still not where they need to be in terms of the replacement cycle Bowie starting to ramp up so.
Speaker Change: Got it thank you.
Speaker Change: Youre welcome.
Speaker Change: Hi.
Speaker Change: Thank you. Our next question will come from Justin <unk> with CJS Securities. Your line is open.
Speaker Change: We just don't see it.
Speaker Change: And we're not hearing it from our customers.
Speaker Change: Alright, that's helpful. And then just following up on the M&A commentary can you give us any indication of how far along or in any processes and P. F T or any any deals that you guys are in.
Speaker Change: Good morning Joseph.
Joseph: Good morning.
Speaker Change: Question Theres been a bunch of headlines about travel being down given the political environment have you seen or do you expect to see that impacting your business at all.
Max Mitchell: For more information, visit www.FEMA.gov And our results in the quarter reflect what we conveyed. In addition, we described in detail a deeper understanding of our business system in the context of new acquisitions and how we add value to businesses we acquire and our very active and detailed integration process. And we are actively working opportunities today. We have not slowed down in any way in the present environment. The strength of our underlying business, our strategy, and our capabilities in both operational execution and commercial excellence, coupled with an extremely strong balance sheet, positions us extremely well to continue driving above-market growth, both organically and through acquisition.
The first two weeks in May the first two weeks of May Alex and I will be traveling with the teams we've got kind of nonstop due diligence across a multiple.
Speaker Change: We're seeing the same headlines reading the same reports so we don't we're not seeing it read through I mean, I think this aged fleet.
Speaker Change:
Speaker Change: There's still requiring the same level of maintenance.
Speaker Change: Acquisitions, both domestically and internationally in terms of locations. So we're very very active in the process.
Speaker Change: The market continues to be strong deliveries are still not where they need to be in terms of the replacement cycle Bowie starting to ramp up so.
Speaker Change: <unk>.
Speaker Change: No.
Speaker Change: We just don't see it.
Speaker Change: Really nice fit really nice fit attractive we're going to be competitive.
Speaker Change: And we're not hearing it from our customers.
Speaker Change: I'm hopeful that.
Speaker Change: Alright, that's helpful and then just.
Speaker Change: We will have some activity announced in 2025.
Speaker Change: Following up on the M&A commentary can you give us any indication of how far along or in any processes and P. F T or any any deals that you guys are in.
Speaker Change: Alright, great I appreciate you taking the questions. Thank you.
Speaker Change: Once again, if you'd like to ask a question. Please press star one on your telephone keypad at this time.
Max Mitchell: Want to thank all of you for going out of your way to visit us with us in Florida, and our team enjoyed welcoming you to the machine of being crane and hopefully encouraging some of you to listen to some classic Pink Floyd.
Speaker Change: The first two weeks in May the first two weeks of May Alex and I will be traveling with the teams we've got kind of nonstop due diligence across multiple.
Speaker Change: Our next question will come from Tony Bancroft with Gabelli funds. Your line is open.
Tony Bancroft: Good morning.
Speaker Change:
Speaker Change: Hey, great job on the quarter very well done.
Speaker Change: Acquisitions, both domestically and internationally in terms of locations. So we're very very active in the process.
Alex Alcala: Now, let me pass it over to our Chief Operating Officer, Mr. Alex Alcala, to provide some color on the current environment. Thanks, Max. Yes, our teams are having great fun.
Speaker Change: I just I just wanted to I know you've pretty much said that the tariffs are going to be relatively mitigated not an impact.
Speaker Change:
Speaker Change: No.
Speaker Change: Really nice fit really nice fit attractive we're gonna be competitive.
Speaker Change: On the Aero side.
Alex Alcala: I must admit, I wish we could enjoy a few moments of boring and repetitive.
Speaker Change: You are hearing comments from China trade Ministry of yesterday about what disruptions in China.
Speaker Change: I'm hopeful that.
Speaker Change: We will have some activity we announced in 2025.
Alex Alcala: Before I get into the segments, let me provide some insights into our tariff exposure. Overall, about seven to 8% of our cost of goods sold consists of materials and components that are directly imported into the United States. Another three to 4% of cost of goods sold are intercompany sales into the United States, a portion of which is exempt from tariff. Our direct imports into the United States are skewed somewhat towards process flow technology. with Aerospace and Electronics relying more heavily on a U.S. supply chain. For process flow technologies, the largest exposure is China, where we procure biodials, pumps, castings, and motors.
Speaker Change: In commercial travel.
Speaker Change: Alright, great I appreciate you taking the questions. Thank you.
Speaker Change: And then you've seen people in France, and France Youre seeing.
Speaker Change: Space and defense industry talking about tariff exemptions.
Speaker Change: Once again, if you would like to ask a question. Please press star one on your telephone keypad at this time.
Speaker Change: How do you see this all playing out maybe its not as impactful to you, but maybe you could talk to that a little bit next.
Speaker Change: Our next question will come from Tony Bancroft with Gabelli funds. Your line is open.
Speaker Change: Well.
Speaker Change: It's anybody's.
Tony Bancroft: Good morning.
Speaker Change: Anybody's guess honestly in terms of how it moves forward for quite honestly I'm more optimistic quite honestly I think things will get resolved I think.
Speaker Change: Hey, great job on the quarter very well done.
Speaker Change: I guess I just wanted to I know you've pretty much said that the tariffs are going to be relatively mitigated not an impact.
Speaker Change: Or.
Speaker Change: Trading partners.
Speaker Change: While theres certainly a number of serious issues that are being addressed or our global environment is too important to one another.
Speaker Change: On the Aero side.
Speaker Change: You are hearing comments from the China trade Ministry of yesterday about disruptions in China.
Speaker Change: I think these things will get sorted I think.
Speaker Change: In commercial travel.
Alex Alcala: However, our total China exposure is well below 3% of Crane's total cost of goods. The other notable exposures for PST are India, primarily related to castings, and Thailand, primarily for machine parts. Neither of those exposures reaches 1% of Crane's total cost of sales. At Aerospace and Electronics, the primary source of import is Malaysia, largely related to printed circuit boards, and only 1 to 2% of total cost for sale for crane overall. While much smaller, AMI does also import wire harnesses, machine parts, and power sources from a number of countries, none of which is particularly material.
Speaker Change: When that does thats going to be very positive for all of us as we move forward.
Speaker Change: And then you've seen people in France, and France Youre seeing.
Speaker Change: Space and defense industry talking about tariff exemptions.
Speaker Change: Thanks, so much great job.
Speaker Change: How do you see this all playing out maybe its not as impactful to you, but maybe you could talk to that a little bit next.
Tony Bancroft: Thanks, Tony.
Tony Bancroft: Thank you. This concludes the Q&A portion of today's call I would now like to turn the floor over to Max Mitchell for closing remarks. Thank you all for attending today. Our focus today is executed on everything within our control reacting swiftly to what is outside our control serving our customers and continuing to invest in <unk>.
Speaker Change: Well.
Speaker Change: It's anybody's.
Speaker Change: Anybody's guess honestly in terms of how it moves forward for quite honestly I'm more optimistic quite honestly I think things will get resolved I think.
Speaker Change: Or.
Speaker Change: Trading partners.
Tony Bancroft: Our growth initiatives and technology, roadmaps and driving profitable growth.
Speaker Change: While theres certainly a number of serious issues that are being addressed or our global environment is too important to one another.
Tony Bancroft: We expect to emerge from it.
Tony Bancroft: Location, and an even stronger competitive position.
Speaker Change: I think these things will get sorted I think.
Speaker Change: We entered the year as the late Great Gene Hackman said challenges are what make life interesting overcoming them is what makes life meaningful our teams acquaint continue to make our lives hugely meaningful as we continue to deal successfully with life's interesting challenges.
Speaker Change: When that does thats going to be very positive for all of us as we move forward.
Alex Alcala: We expect to offset the majority of the potential tariff impact to price and productivity. We have demonstrated consistently differentiated execution through cycles with this leadership team. Cadence and Discipline of the Crane Business System, our machine, along with our performance-based culture. are even more valuable in times like these. as they enable us to make data driven decisions quickly with flexibility to adapt as conditions change and with accountability. We will manage through this dislocation and expect to emerge even stronger.
Speaker Change: Thanks, so much great job.
Tony Bancroft: Thanks, Tony.
Tony Bancroft: Thank you. This concludes the Q&A portion of today's call I would now like to turn the floor over to Max Mitchell for closing remarks. Thank you all for attending today. Our focus today is executed on everything within our control reacting swiftly to what is outside our control serving our customers continuing to invest in <unk>.
Tony Bancroft: Thank you all for your interest in Crane, and your time and attention. This morning and have a great day.
Tony Bancroft: Thank you. This concludes today's Crane company first quarter 2025 earnings Conference call. Please disconnect. Your line at this time and have a.
Tony Bancroft: Of our growth initiatives and technology, roadmaps and driving profitable growth.
Tony Bancroft: We expect to emerge from this.
Tony Bancroft: Location, and an even stronger competitive position.
Tony Bancroft: We entered the year as the late Great Gene Hackman said challenges are what make life interesting overcoming them is what makes life meaningful our teams acquaint continue to make our lives hugely meaningful as we continue the deal successfully with life's interesting challenges. Thank you all for your interest in Crane.
Alex Alcala: Now some thoughts on the segment. starting with aerospace and electronics. There is no material change in end market conditions relative to our prior expectation. Aerospace remains a very strong demand environment. On the commercial side of the business, activity remains healthy, with Boeing continuing to ramp up production and aftermarket activity continuing at elevated levels. 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. Looking ahead to the balance of 2025, we continue to anticipate core sales growth for the year to be up mid to high single digits, with that growth leveraging that 35 to 40%.
Tony Bancroft: And your time and attention this morning and have a great day.
Tony Bancroft: Thank you. This concludes today's Crane company first quarter 2025 earnings Conference call. Please disconnect. Your line at this time and have a wonderful day.
Tony Bancroft:
Tony Bancroft: Uh huh.
Tony Bancroft: [music].
Alex Alcala: That guidance assumes continued strong sales with the ramp up of Boeing offset by decelerating year-over-year growth rates in commercial aftermarket that we have previously highlighted as the comparisons become more challenging. Pointing out that this is our 16th quarter of double-digit commercial aftermarket growth that as we talked about when we last reported, will naturally moderate over time. We continue to see above cycle growth for this segment for the remainder of this decade. We also continue to pursue new opportunities and win new business across the segment. For example, in the quarter, we want additional new content on the XM30 optionally manned fighting vehicle demonstrator program with a defense power solution.
Alex Alcala: As we have discussed in the past, we are very well petitioned, regardless of which of the defense crimes is awarded the program. and we are further improving our position. In our sensing and power systems business, we were recently awarded contracts and funded engineering development work on the Bell B280. DogeC328Echo, and Unmanned Aviation Platform. All great programs where we see significant growth over the next decade. While still early in the development process, we remain actively engaged with engineering teams and our key customers on the technical architecture for the next generation single aisle aircraft to ensure that our technology roadmaps and development plans are aligned with our customer needs.
Alex Alcala: and really impressive performance by our landing solution team that completed flight test hardware for a leading unmanned fighter aircraft program in a record six month timeframe. It's unprecedented for an anti-skid brake system to be developed that quickly. for positioning us well for future opportunities. a perfect example of the machine at work in engineering. Outstanding work by our team.
Alex Alcala: Very confident for yet another outstanding year at aerospace and electronics.
Alex Alcala: at Process Flow Technologies. We remain well positioned to outgrow our markets across We have systematically repositioned our portfolio around our core end markets, including chemical, pharmaceutical, water and wastewater, cryogenics, and industrial automation. These are higher growth and markets and these are the markets where we have the strongest competitive position and the most differentiation.
Alex Alcala: Enabling Sustainable Market Outlook. We remain focused on investing for growth over the long term, with continued execution against our multi-year technology and new product development roadmaps, as well as commercial excellence emissions. all enabled by a consistent operational execution. Tactically, we have proven our ability to react to any changes in demand quickly, and we will remain nimble during this period, taking any necessary and appropriate price cost measures.
Alex Alcala: However, our strategy is unchanged. And we will manage through any potential demand fluctuations without losing focus on longer term goals and objectives. Looking ahead to the balance of 2025, given our line of sight today, we still anticipate positive core growth goals for the year. A few notable wins in the quarter included significant customer approval for one of our new Saunders Pharmaceutical valves with a key target customer. This approval was a critical step for the business, and we continue to drive share gains with new product development, and we are seeing great progress. We were awarded a $5.7 million project for line pipes and line valves for a Saudi Arabian mining company that is working to develop a third complex in Saudi Arabia for fertilizer production capacity.
Alex Alcala: Our localized site was key to secure this order. We continue to build out our capabilities in cryogenic space, including both the cryo work and Technifab acquisitions from last year, which are now working closely with our organic initiatives to expand our portfolio of cryogenic valves and vacuum jacketed pipes. Our combined platform is continuing to grow at a strong pace. And in the quarter, we had some significant wins, particularly the space launch customers. So our businesses remain well positioned to continue to deliver great results.
Alex Alcala: We still expect to significantly add those results to add to those results with acquisition. We have a very strong balance sheet today with at least 1.5 billion of M&A capacity. We also have a robust pipeline of potential acquisitions. M&A activity has not slowed down at all. The deals we are working on today include a number of opportunities in both aerospace and electronics, as well as process flow technology. And they range from the small sub 100 million deals, like those we completed last year, to many times that size. We mentioned our rigorous process, the machine for acquisition integration and creating value from any business.
Alex Alcala: We have just as robust a process for M&A opportunity identification and due diligence. And I'm optimistic about our prospects of deploying capital this year on some great opportunity.
Alex Alcala: I also wanted to share some takeaway from our recent annual senior leadership conference. About 200 of Crane's most senior associates spend three days at GE's Old Crotonville training facility to share best practices and to keep our global teams around the world connected. Three days to focus on reinforcing the machine that delivers results at Crane.
Alex Alcala: I remember my first senior leadership meeting shortly after I joined Crane in 2013. A great few days, but heavily focused on operational execution only, which was needed, and the focus in those days. We were very good then, but so much better today. Last month, however, the focus was everything we were doing to drive growth and commercial execution. Sharing the best practice examples across cranes, our long-term technology and product world maps, commercial excellence tools, simplification initiatives, and strategic pricing. It was followed by training on new enhancement to our process for strategy development. led by Shangaza Dasent, who joined Crane last year to lead our process flow technology segment.
Alex Alcala: A powerful few days, and I'm incredibly proud of our teams around the world who have made so much progress and have the momentum to continue to do so. Taking all this together, just a lot of really exciting initiatives at Crane.
Alex Alcala: It all reinforces our confidence that regardless of the current environment, over the long term, we will deliver a four to 6% long term core sales growth rate through cycles from resilient and durable businesses with solid aftermarkets. Substantial operating leverage on top of already solid margins today. That should lead to double digit average annual core profit growth with potential upsets from capital deployment. And with virtually no net debt, the capital deployment opportunity is significant.
Rich Maui: Now let me turn the call over to our CFO, Mr. Rich Maui, for more specifics on the court. Thank you, Alex. And good morning, everyone. Starting off with total company results. We drove seven and a half percent core sales growth in the quarter with strength across both segments. Adjusted operating profit increased 18% driven by volumes, solid net price and productivity. In the quarter core FX neutral backlog was up 12% compared to last year, driven by outsized strength at aerospace and electronics and core orders were up 16% compared to last year as well. Also driven by aerospace and electronics, but also modest growth in process flow technologies.
Rich Maui: That was a bit ahead of our expectations.
Rich Maui: Further, we are in a net cash position and have more than $1.5 billion in debt capacity today for M&A. A few more details on the segments in the quarter starting with aerospace and electronics sales of $249 million increased 10% in the quarter with all of that growth organic. And even with the continued high level of sales growth, notably our record backlog of 960 million increased even further of 21% year over year and up 11% sequentially. Total aftermarket sales increased 20% with commercial aftermarket sales up 19% and military aftermarket up 24%. and OEM sales increased 6% in a quarter with 10% growth in commercial and up 1% in military.
Rich Maui: Adjusted segment margin of 26%, a record high for the segment, increased 360 basis points from 22.4% last year, primarily reflecting higher volumes, price net of inflation and productivity.
Rich Maui: at Process Flow Technologies. In the quarter, we delivered sales of $309 million, up 9%, driven by solid core sales growth of 5% in the quarter, along with a 5% benefit from the CryoWorks and Technofab acquisitions, offset by a point of unfavorable foreign exchange. Compared to the prior year, core FX neutral backlog decreased 6% and core FX neutral orders were up 2%, both impacted by project timing.
Rich Maui: You might recall the notable project wins we highlighted in Q1 of last year. And on a sequential basis, core FX neutral orders were up 10% compared to the fourth quarter. Adjusted operating margin of 20.9%. Expanded 10 basis points. Importantly, core operating leverage was 35% at the high end of our 30 to 35% targeted range. As you all know, leverage is always impacted, in particular in the first year of an acquisition, which was the case in this quarter. The strong overall performance was driven by productivity, strong net price, and the higher volume.
Rich Maui: Below the segments, some of you may have also noticed that adjusted corporate expense was about $25 million in the quarter, which is higher than the quarterly average you would expect.
Rich Maui: This is related to accounting rules that require accelerated amortization of stock compensation expense for associates that are retirement eligible. So stock compensation expense will be much higher in the first half and lower in the second half. We still expect $80 million of corporate costs for the full year.
Rich Maui: Hey, all of the comments on today's call regarding the uncertain environment ahead reminded me of a quote from the classic and timeless romantic drama, Dodgeball, when the great character, Patches O'Houlihan, played by the late Rip Torn, was preparing the team in practice and said, if you can dodge a wrench, you can dodge a ball. There have certainly been a few wrenches thrown around to start the year and our team is doing an outstanding job dodging them so far. I personally only have a couple of them.
Operator: And with that operator, we are now ready to take our first question. Thank you.
Operator: The floor is now open for questions. At this time, if you have a question or comment, please press star one on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star two.
Operator: Again, we ask that you please pick up your handset when posing your questions to provide optimal sound quality. Thank you.
Damian Karas: Our first question will come from Damian Karas with UBS. Your line is open. Good morning, Damian. Good morning. Hey, good morning, Max.
Damian Karas: Hey, Rich, hope you can dog these wrenches about to come your way. I appreciate all the details around your main CAREF exposures.
Rich Maui: Maybe you could just give us a little bit more clarity on the updated guidance. To what extent is price contributing to your sales guide at this point? And just, you know, kind of considering the strength of the first quarter orders and that uptick in backlog, is it fair to assume that that's longer lead time backlog that's really more, you know, 2026 and beyond? Yeah, so Damian, just to maybe hit your first your first question first on price, yeah, we would expect to see somewhere in the vicinity of about 3% overall, more heavily weighted to PFT for sure, you know, perhaps a little bit higher in the PFT segment, a little lower in A&E.
Rich Maui: So just overall, that's what we would expect for us to offset, you know, the majority or most of the tariff impact.
Rich Maui: As it relates to backlog, you know, maybe just a little bit of color to provide there. Certainly aerospace and electronics was significant overall in the quarter and the growth in the backlog. Fairly broad based, you know, maybe some color, aftermarket continues to be fairly strong, as you saw. Alex mentioned also the comps in the latter part of the year, but, you know, aged fleet continues to be a dynamic or signature in the market space. Retirements not happening at the levels that would cause you to believe a significant decline in aftermarket. So we feel good about the build that's happened in aftermarket.
Rich Maui: And then on OE, it was really a combination of both commercial and, and defense from an orders point of view on commercial, obviously, the build rates are continuing. And, and widespread there as well, right between Boeing, Airbus and Comac, frankly, in the quarter. Defense, to your point a little bit, there's some there's some multi year orders in there, too. So it gives us even further confidence in 2026 already. So a few, a few multi year orders that contributed to the to the strength in the quarter. But in terms of the guide in relation to the guide and the strength of the backlog, yes, it's related to the length of those orders.
Rich Maui: That's reading through Beyond 25. Right, Rich? Yep.
Damian Karas: Okay, got it. That makes total sense.
Rich Maui: And then, you know, follow up to some of those comments on defense. I mean, within A&E, you know, if you look at some of the details of the $150 billion defense package that's in reconciliation, you know, are there any items that kind of stand out to you as, you know, crane programs or growth drivers in the future? Yeah, I would say just just overall, you know, we have such a broad exposure, Damian, across defense platforms, whether it's fixed wing, you know, even even rotary, you know, we even we saw some nice aftermarket demand on rotary actually in the quarter, on CH 47 on aftermarket.
Rich Maui: But overall, from a spend point of view, whether it's munitions or aircraft or radar applications, as you know, where we have a particular strength, we feel really good about the approvals and where we see spend being allocated as we as we look forward into 26. Some of those themes, as Rich was just mentioning, I would call out, you know, munitions replenishment, unfortunately, in this global environment. Aging military upgrades, that's a key theme. I would say electrification is another key theme for the future, which which we highlighted yesterday also. So those are some of the some of the major thematic drivers that we continue to see strength through the Understood.
Damian Karas: Thanks again.
Damian Karas: Good luck out there.
Damian Karas: I'll pass it along. Thanks, Damian.
Scott Deuschle: Our next question will come from Scott Deuschle with Dolce Bank.
Scott Deuschle: Your line is open. Hey, good morning. Morning, Scott.
Rich Maui: Rich, can you characterize the growth split between volume and price that you saw at A&E this quarter? Yeah, it was roughly 50 50. So right, almost right down the middle.
Rich Maui: Okay, and was commercial OE contributing very material materially to the pricing gains and segment experience? Yeah, you know, I don't have the full breakout of that. But certainly, we've been making nice progress on certain areas and commercially. But clearly, there has been whether it's from existing contracts with index increases or changes that we might have made, you know, in response to contracts that needed to be addressed, but I don't have a specific breakout, but it was pretty, pretty healthy, I would say across both aftermarket and commercial.
Scott Deuschle: Okay.
Scott Deuschle: Just to clarify, did any major commercial OE LTAs reprice this quarter that you didn't have repriced last quarter? I'm just trying to understand the sequential EBIT growth at A&E. No. Okay.
Rich Maui: Rich, consensus has EBIT dollars down at A&E over the remainder of the year versus what you just reported at A&E this quarter. I guess, you know, I realize it's an environment of uncertainty. But is there any discrete reason why you would think that would be the case and EBIT dollars would decline from this level? Yeah, so what I would say is that in the quarter, you know, we had a very strong quarter overall, as you saw with the leverage at 60% in A&E. We had a decent mix, we had strong engineering sales, completing a few, I think, major development programs that had some nice margin to them.
Rich Maui: So a few things is what I would say added up overall in the quarter that contributed to that 60%.
Rich Maui: You know, Alex mentioned in his prepared remarks that, you know, the comps will start to kind of move down. But overall, you know, there's nothing that would suggest any sort of overall Weakening to any significant degree, and there was perhaps just a few items in the quarter that that we benefited from.
Scott Deuschle: Okay, and is Comac still taking delivery of the parts he makes with the C919, even with the fertilitory tariffs they have? Yeah, thanks for that question.
Alex Alcala: This is Alex. We actually met with Comac a couple of weeks ago to look at the ramp up and everything is moving forward very smoothly. They have a big ramp up projected this year and they're on track. They're still taking deliveries, emphasize the importance of staying on track. They have to market as well. So everything's progressing quite well. As you know, we have a really strong position with that 919 platform. And they're also in the development of the 929, the wide body, which we expect to also have a great position. Our team's doing a great job.
Alex Alcala: A lot of our team members were in China last week. And, you know, all looks positive from that regard.
Scott Deuschle: Okay, thank you. I'll pass it along. Thanks, Scott.
Jeff Sprague: Our next question will come from Jeff Sprague with Vertical Research Partners. Your line is open. Morning, thank you. Good morning. Hey, good morning, Max.
Jeff Sprague: Hey, a high level one for you first and then a couple of detailed questions.
Max Mitchell: You know, in your opening commentary, just talking about emerging stronger and the like, was that just kind of an overarching view that, you know, kind of sweating the organization, exercising the muscle trial by fire makes you better? Or do you actually see some places maybe where you have competitive footprint advantage or other advantages versus competitors that you might be able to leverage here?
Max Mitchell: Both, Jeff, both. I think, you know, anytime that you exercise like this, it sharpens the sword, but the other is we're seeing some opportunities where our competitors are positioned or some decisions that they're making that we think we have some openings. Okay, great.
Rich Maui: And then just on the tariffs again, so I think the 7% to 8% of COGS called $100 million or so run rate.
Rich Maui: I didn't follow quite what Alex was getting at with the additional 3% to 4% intercompany. Was that kind of a USMCA comment and not a cost headwind? Or maybe you could just elaborate on what that meant and whether I'm right on the roughly $100 million. Yeah, thank you. Thank you for the question. Yeah, the $100 million is related to direct imports from external suppliers, and then there's another 2% or 4% of interunit. Some of that is because of USMCA from interunit shipments. But those are the imports. That's not the tariff impact that we expect in our P&L.
Rich Maui: So that's just the overall. The tariff impact is more on the $60 million range for this year, considering all factors, indirect impact on suppliers. And that's mostly on the PFT side, because as you know, our aerospace business is very heavily sourced domestically. Right, so we'll call it 100 million or so direct annualized 60 million on a in-year basis.
Alex Alcala: And then just maybe one other one for you, Alex, just where you might see some demand risk in your business. I'm kind of thinking chem, right? Those guys are cutting capex and chem prices are declining. Is that where you hedged your guide from an end-demand standpoint? And maybe if there's other verticals within PFT that you'd want to address.
Alex Alcala: Yeah, Jeff. So in PSP, where we think about the, the, the MRO side and the project side, so across all verticals, I think the MRO side, usually when there's softness, remains somewhat consistent. And that's all about the project activity and shifting to the right. So on the chemical side, what we've seen last year and this year, different dynamics by region, US continue to move, Middle East continue to move forward. Europe softening. We did start hearing customers thinking about delaying decisions, trying to see how this tariff points out. So we did make assumptions on project shifting to the right, in particular, in the chemical, in the United States, but also in other regions.
Alex Alcala: and one that I don't think is our guidance.
Jeff Sprague: Great, thank you.
Rich Maui: And then one quick one for Rich. FX you're still guiding minus one. It sounds like you're dropping a couple pennies in your back pocket there.
Rich Maui: Maybe just was that a 330 rates or maybe just update us on on that? Yeah, it's exactly it's exactly what it is. It's we just hung it and we're not gonna you know, all the changes that can happen there. And so we just stuck with 330 rates. Yeah, there's been some favorability here. We'll see if it if it sticks, but your your hunch is correct. A couple of pennies in my pocket.
Rich Maui: Thank you for next one.
Nathan Jones: Our next question comes from Nathan Jones with Spiefel. Your line is open. Good morning, everyone.
Nathan Jones: I guess in the spirit of jokes, I won't say that I wish I was there, but I do wish you were here. Oh, good. I like that.
Alex Alcala: I guess the first question is on supply chain. During COVID there was obviously a lot of supply chain disruption and you guys are components that go into other systems. I'd be less concerned about your ability to manage your supply chain and more concerned about, you know, people who who supply into those same projects being able to manage their supply chain.
Alex Alcala: Do you see any risk to any parts of the business that could arise just from other impacts on Other supplies, supply chains that could impact your ability to or your customers ability to finish projects and take delivery of products similar to maybe what happened during COVID. Yeah, nice. And thanks for questions, Alex.
Alex Alcala: So I think you have to think about separately from PFT and A&E perspective. On the PFT side, I would not expect anything significant that supply chain has returned since last year to normal rates. It's pretty stable. Of course, the shipment lanes and things like that from Asia are getting clogged up and so forth. But I would not expect any significant change in supply chain ability to deliver.
Alex Alcala: On that side, I think on the A&E side, through here the first month, we saw pretty stable, slightly improving. I know everybody saw on the news the issues with the SPS fastener facility and the Chicago Municipal Foundry that did not directly impact us. That said, as some companies try to adjust their supply chain and the tariffs won't help supply chain improvement in aerospace, for sure. So we would expect some lead time extensions as people get out of certain regions and try to get others and capacity constraints from some suppliers from those movements in supply chain.
Alex Alcala: But we're not seeing any major disruption caused by that. And we're planning for some of those times to, in some areas, be extended. And that's what we factored in as well.
Nathan Jones: Thanks for that. I guess my second question, you talked about PFT orders being a bit stronger than you'd anticipated in the first quarter. But if the question there is, do you think customers were pre-positioning ahead of, you know, tariff related price increases?
Alex Alcala: And then did you guys pre-position some inventory in front of Paris during the first quarter yourself? Yeah, good question. On the inventory, no, we didn't. You know, we, we have experience managing these tariffs. It's never, as you know, we're engineered to order, it's never the right inventory to try to play games. So from that standpoint, we didn't. On the pre-buy, I mean, we did hear some activity pre-buy from distributors stocking a bit more, not really significant, I would say, not material. Really, what drove this better than expected. There are some projects that have been tracking for a while now since last year that hit in the quarter that drove some of that favorability.
Nathan Jones: So I would say a little bit of pre-buy, but not anything major.
Nathan Jones: Great, thanks very much for taking my questions and I'll see you on the dark side of the moon. Thanks, Jason. Well done.
Operator: Once again, if you would like to ask a question, you may press star one on your telephone keypad.
Ronald Epstein: At this time, our next question will come from Ronald Epstein with Bank of America. Your line is open. Hey, good morning.
Jordan Lyonnais: This is Jordan on Ferrand. Hi, Jordan. A couple of questions.
Max Mitchell: First one for M&A. Have you guys seen any slowdown in deals or pauses happening just because of the macro? No, we haven't. We haven't seen any slowdown. It's very, very active for us. Okay.
Max Mitchell: And then on Boeing's call, they made a comment about their buffer stock having been high to stabilize the supply chain and that it would go back down to normalized levels. You guys have been very good about controlling the inventory that you guys have in the channel. Are you concerned that although for other suppliers that you might be feeding into? that would be getting destocked. I mean, I think Boeing has done a great job being transparent on their inventory position with us, I imagine with other suppliers as well. So we are very, very well aligned to what they need and are expecting, and we're planning to support that.
Max Mitchell: So our factories are well in tune and efficient to support that ramp up. So my understanding is that it's the same with many other suppliers that are well in tune with Boeing's inventory position and planning appropriately.
Jordan Lyonnais: Got it. Thank you guys so much.
Matt Summerville: Thank you. Our next question will come from Matt Summerville with D.A. Davison. Your line is open. Morning, Matt. Morning, just a couple of follow ups at $60 million.
Rich Maui: I just want to clarify is that the unmitigated number meaning that is the magnitude by which your cogs are going higher all else equals is a result of the tariffs. I just want to be clear on Yeah, that that would be the gross the gross number right that we will substantially mitigate assuming these tariffs exist through the entire balance of the year no change Up or Down? Got it. Thank you for that clarification.
Alex Alcala: And then you talked just very briefly on the chemical market with respect to PFT. Can you maybe do a little bit more of a deeper dive in terms of what you're seeing across both the MRO and project side of the business, geographic color around the major and market buckets and product lines that you guys typically refer to in that business? Yeah, I mean, for PST, as you know, chemical, really strong position. We have a substantial presence globally. I think we went into the year with the expectations different by region. And we saw that play out in Q1.
Alex Alcala: So in the Americas, we saw positive growth, both on MRO and project activity, where customers are expanding, downsides, driving efficiency, upgrades, things of that nature. Middle East, similar, continued investment and growth. And then since last year in Europe, it's been soft, declining, and that has continued. China as well, somewhat soft, and Asia-Pac, kind of mixed. So, how we closed out last year was the first four months of the year. Now, going forward, like I mentioned, we expect some of that project activity in the Americas to shift to the right, some softening demand versus what we saw in Q1, and that's what we expect for our guidance.
Alex Alcala: Thank you for that, Alex. Can you talk about some of the other end markets in that business as well, what you're seeing with cryo, industrial, automation, water, wastewater, etc? So water waste water in the quarter orders were strong up. So we feel good about that. Continuing cryogenics has been our fastest growing segment, you know, double digits. So that has been a really exciting platform that we've added, and continue to expand and gain share and take advantage of the market. A lot of that's driven by space launch activity, where applications are used for the platforms are being built out in various parts of the country.
Alex Alcala: And then general industrial activity has in the first part of this year in the quarter has been slightly up. So I think overall, a lot of positives in the first quarter. I think, you know, partially offset by what I mentioned on chemical, particularly in Europe, and other parts of the world as well. Got it.
Rich Maui: And then maybe just one final one. Rich, as we look out over the balance of the year, is there anything you would want to draw our attention to in terms of kind of the remaining earnings cadences move through Q2, Q3 and Q4? Yeah, I think I think the high level would be, as you're looking at next quarter, just slightly down, you know, slightly.
Rich Maui: And then I would, I would think of the full year as, you know, more, you know, equally weighted, frankly, first half, second half, overall. Thank you. You're welcome.
Justin Ages: Our next question will come from Justin Ages with CJS Securities. Your line is open. why just Morning. Question, there's been a bunch of headlines about travel being down given the political environment. Have you seen or do you expect to see that impacting your business at all? Look, we're seeing the same headlines reading the same reports, but we don't, we're not seeing it read through. I mean, I think this age fleet is still requiring the same level of maintenance. Aftermarket continues to be strong. Deliveries are still not where they need to be in terms of the replacement cycle.
Justin Ages: Boeing's trying to ramp up. So, you know, I, we just don't see it. And we're not hearing it from our customers either. All right, that's helpful.
Max Mitchell: And then following up on the M&A commentary, can you give us any indication of how far along or in any processes in PFT or in A&E, any deals that you guys are in? The first two weeks of May, yeah, the first two weeks of May, Alex and I have been traveling with the team. We've got kind of nonstop due diligence across multiple acquisitions, both domestically and international in terms of locations. So we're very, very active in the process. You know, really nice fit, really nice fit, attractive. We're going to be competitive. I'm hopeful that, you know, we'll have some activity to announce in 2025.
Max Mitchell: All right, great.
Justin Ages: I appreciate you taking the question.
Operator: Thank you. Once again, if you would like to ask a question, please press star one on your telephone keypad at this time.
Tony Bancroft: Our next question will come from Tony Bancroft with Gabelli Funds. Your line is open. Okay, good morning. Hey, great job on the quarter. Very well done. I know you pretty much said that the tariffs are going to be relatively mitigated and not an impact. But on the aero side, you're hearing comments from the China Trade Ministry yesterday about disruptions in China and commercial travel. And then you've seen people in France, you're seeing the aerospace and defense industry talking about tariff exemptions. How do you see this all playing out?
Max Mitchell: Maybe it's not as impactful to you, but maybe you could talk to that a little bit next. Well, I, if anybody's Anybody's guess, honestly, in terms of how it moves forward. Quite honestly, I'm more optimistic. Quite honestly, I think things will get resolved. I think our trading partners, while there's certainly a number of serious issues that are being addressed, our global environment is too important to one another. And I think these things will get sorted. I think When that does, it's going to be very positive for all of us as we move forward. Thanks so much.
Tony Bancroft: Great job. Thanks, Tony.
Operator: This concludes the Q&A portion of today's call.
Max Mitchell: I would now like to turn the floor over to Max Mitchell for closing remarks. Thank you all for attending today. Our focus today is executed on everything within our control, reacting swiftly to what is outside our control, serving our customers, and continuing to invest in all of our growth initiatives and technology roadmaps and driving profitable growth. I fully expect to emerge from this location in an even stronger competitive position than when we entered the year.
Max Mitchell: As the late, great Gene Hackman said, challenges are what make life interesting. Overcoming them is what makes life meaningful. Our teams at Crane continue to make our lives hugely meaningful as we continue to deal successfully with life's interesting challenges.
Max Mitchell: Thank you all for your interest in Crane and your time and attention this morning. Have a great day. Thank you.
Operator: This concludes today's Crane Company first quarter 2025 earnings conference call. Please disconnect your line at this time and have a