Crane (CR) Q1 2026 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Tuesday, April 28, 2026 at 10:00 a.m. ET

CALL PARTICIPANTS

• President & Chief Executive Officer — Alejandro A. Alcala
• Executive Vice President & Chief Financial Officer — Richard A. Maue
• Vice President, Investor Relations — Allison Ann Poliniak-Cusic
• Senior Vice President, Investor Relations, Treasury and Tax — Jason D. Feldman

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS

• Adjusted EPS -- $1.65, up 15%, driven by 4% core sales growth and acquisition performance above expectations.
• Total sales -- Increased 25%, comprising 4% core growth and an 18% contribution from recent acquisitions.
• Adjusted operating profit -- Rose 29%, reflecting higher core sales, acquisitions, and favorable price/cost execution.
• Total core FX-neutral backlog -- Up 9%, with sequential core backlog growth of 3% led by Process Flow Technologies.
• Core orders -- Declined 5%, entirely due to a 15% drop in Aerospace and Advanced Technologies from prior-year multiyear orders; Process Flow Technologies core orders rose 5%.
• Full-year adjusted EPS guidance -- Raised by $0.10 to a range of $6.65 to $6.85, with core assumptions including persistent inflation and a potential decline in commercial aftermarket.
• Acquisition contribution -- Expected full-year EPS accretion from acquisitions doubled to 15 cents, with accretion more balanced through the year versus earlier back-half weighting.
• Aerospace and Advanced Technologies sales -- $318 million, up 28%, with 9.4% core growth and backlog at nearly $1.2 billion (14% core growth; 24% total, including Druck).
• AAT OEM sales -- Up 16%; commercial OEM up 20%, military OEM up 10%.
• AAT aftermarket performance -- Military aftermarket up 28%; commercial aftermarket down 13%, with orders up 11% (and 10% sequentially).
• AAT adjusted margin -- 24.6%, compared to 26.2%, mainly reflecting Druck acquisition impact but higher than expected.
• Process Flow Technologies sales -- $378 million, up 23%; core sales down 0.6%, acquisitions contributed 19 points, and FX contributed 4 points.
• PFT adjusted operating margin -- 22.1%, representing a 50-basis-point improvement even with acquisition dilution.
• PFT backlog and orders -- FX-neutral backlog down 2.5% year over year but up 7% sequentially; core orders up 5%.
• Segment core growth and leverage guidance -- Aerospace and Advanced Technologies guidance at high end of 7%-9% range, leveraging 35%-40%; Process Flow Technologies core growth flat to low single digits, leveraging 30%-35%.
• Pro forma net leverage -- Ended quarter at 1.4 times, supporting additional M&A capacity.
• Corporate expense -- $24 million for the quarter; full-year expectation unchanged at $80 million to $85 million.
• Tax rate -- 2026 full-year tax rate projected at 23%.
• Cryogenics business -- Now 4%-5% of PFT, growing at 15%-17%, primarily serving space launch and aerospace infrastructure.
• PFT Middle East exposure -- About 5% of segment sales; regional project delays but no cancellations reported.

RISKS

• Guidance now assumes a decline in commercial aerospace aftermarket, citing potential pressure from elevated oil prices and Middle East travel disruptions, though no impact has yet been observed on orders.
• PFT projects in the Middle East are being delayed due to ongoing regional conflict and shipment lane disruptions, with execution risks for the balance of the year despite no cancellations.
• Rising commodity and freight inflation is expected to create margin pressure in the remainder of the year, partially offset by planned pricing actions.
• Core orders declined 5%, with Aerospace and Advanced Technologies down 15% due to prior-year record orders, signaling variable year-over-year demand comparables.

SUMMARY

Crane Company (NYSE:CR) raised adjusted full-year EPS guidance by $0.10 to a new range of $6.65 to $6.85, reflecting strong execution and performance from both core operations and recent acquisitions. The company disclosed that EPS accretion from Druck, Panametrics, Reuter-Stokes, and OPTECH Danielote acquisitions will at least double prior expectations, with contributions now more balanced between halves of the year. Commercial aftermarket pressures are now included in guidance assumptions, anticipating order weakness tied to industry headwinds, while military aftermarket and defense order flows have strengthened. The Process Flow Technologies segment is tracking flat to low single-digit core growth, with end-market demand stronger than anticipated in core verticals such as power generation, pharma, cryogenics, and wastewater. M&A activity remains robust, with a healthy pipeline in both key segments and continued discipline around deal size and integration capacity.

• CEO Alcala stated that the company is "exceeding expectations and underscoring the strength of [its] teams and [its] commitment to delivering shareholder value."
• Adjusted segment margin at Aerospace and Advanced Technologies exceeded internal expectations by nearly 200 basis points due to Druck outperformance and underlying core strength.
• Military aftermarket revenue rose 28%, offsetting anticipated commercial aftermarket declines, and backlog at Aerospace and Advanced Technologies reached a record level.
• Commercial aftermarket orders increased 11% year over year and 10% sequentially, even as near-term revenue fell 13%, highlighting potentially resilient underlying demand despite included downward guidance.
• Acquisition integration is producing earlier-than-expected benefits, with value-based pricing, cost actions, and restructuring cited as sources of upside relative to initial forecasts for PSI businesses.
• Cryogenics exposure is concentrated in Americas space infrastructure, and growth correlates with increased commercial space launch activity supported by a broad customer base.
• Management noted pricing flexibility for the majority of recently acquired businesses due to limited longer-term contract exposure, supporting ongoing margin improvement initiatives into next year.
• Middle East project delays remain specific to conflict-driven shutdowns and have been factored into segment guidance conservatively, with execution risk and future demand recovery noted as variables.

INDUSTRY GLOSSARY

• CBS machine: Internal reference to the Crane Business System, the company’s proprietary operational improvement and execution platform.
• PSI: Refers to the acquired businesses Druck, Panametrics, and Reuter-Stokes, and their operating structure within the company since acquisition.
• OE/OEM: Original Equipment/Original Equipment Manufacturer; refers to the production of new components for aerospace platforms as opposed to parts and services for in-service equipment.
• PFT: Abbreviation for Process Flow Technologies, one of Crane’s reporting segments focused on engineered fluid handling equipment.
• AAT: Abbreviation for Aerospace and Advanced Technologies, Crane’s segment supplying aerospace and defense components and systems.
• LTAMDS: Lower Tier Air and Missile Defense Sensor, a specific radar platform mentioned as a driver in defense orders.
• PAC-3: Patriot Advanced Capability-3, a missile defense system referenced as a material part of future defense revenue growth.
• MRO: Maintenance, Repair, and Overhaul; aftermarket activity in industrial or chemical end-markets.
• FX-neutral: Financial measurement excluding the effects of foreign currency translation to strip out currency volatility and reflect underlying trends.

Full Conference Call Transcript

Allison Ann Poliniak-Cusic: Thank you, operator, and good day, everyone. Welcome to our first quarter 2026 earnings release conference call. I am Allison Ann Poliniak-Cusic, Vice President of Investor Relations. On our call this morning, we have Alejandro A. Alcala, President and Chief Executive Officer, and Richard A. Maue, our Executive Vice President and Chief Financial Officer, along with Jason D. Feldman, Senior Vice President, Investor Relations, Treasury and Tax, who is on for Q&A. We will start off our call with a few prepared remarks from Alejandro A. Alcala and Richard A. Maue, after which we will respond to questions. As a reminder, the comments we make on this call will include forward-looking statements.

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

Alejandro A. Alcala: Thank you, Allison. Good morning, everyone. I appreciate you joining us today. As I step into the role of CEO, I am energized by the opportunity to lead Crane at a time when strong leadership, disciplined execution, and agility truly matter. Much like this time a year ago, we are operating in an environment that continues to evolve rapidly. Fortunately, our business system, the CBS machine, together with our global team’s relentless focus, resilience, and commitment to execution with a disciplined cadence, continues to differentiate Crane Company. We view periods of uncertainty and market dislocation not as obstacles but as opportunities to elevate our performance.

Time and again, Crane has emerged from challenging environments stronger than before and increasingly advantaged relative to our competitors. We are off to a strong start in 2026, with first quarter results reflecting excellent execution across the company, exceeding our expectations and underscoring the strength of our teams and our commitment to delivering shareholder value. Adjusted EPS of $1.65 was up 15% over the prior year, driven by 4% core sales growth reflecting broad-based strength at Aerospace and Advanced Technologies and continued strong execution at Process Flow Technologies, including solid core order and backlog momentum. Also of note was the strong performance of our recent acquisitions that drove a substantial amount of upside in the quarter relative to our expectations.

Druck, Panametrics, Reuter-Stokes, and OPTECH all performed exceptionally well, with integration and deployment of CBS progressing ahead of plan and early benefits emerging faster than anticipated and ahead of what was reflected in our January guidance. We entered the year with positive momentum at both AAT and PFT. As the first quarter progressed, our execution further strengthened our confidence in the underlying earnings trajectory for the year. At the same time, however, the external environment became more challenging. Geopolitical dynamics are evolving and macroeconomic uncertainty is still very much part of the backdrop.

Taking all of this into account—our performance to date and the range of scenarios, risks, and opportunities we see ahead—we are raising our adjusted full-year outlook by 10 cents to a range of $6.65 to $6.85. Our guidance reflects what we have clear line of sight to and a high level of confidence in delivering, even against a more uncertain macro backdrop. It assumes continued elevated energy prices and inflation through the balance of the year and already factors in a potential decline in commercial aftermarket. In addition, as you would expect, our teams have actions to get ahead of the increased inflation as we move through the year.

We remain focused on execution, continuing to build on our momentum, and finding potential opportunities to overdeliver. Across the organization, we continue to stay agile in a dynamic environment. Our deep management teams have been here before, and we will manage with the cadence and disciplined execution that you have all come to expect from Crane Company. Now some thoughts on the performance of the recent acquisitions and the segments in the quarter, and as we look to the balance of 2026. As I mentioned, the acquisitions performed exceptionally well. I am extremely pleased with the execution and pace of improvements.

Over the years, we have built tremendous organizational capability that has enabled us to integrate four businesses simultaneously at speed and with zero disruption to the core businesses. This performance reinforces the strength of CBS and the opportunity to create meaningful shareholder value through continued disciplined inorganic growth combined with the power of the CBS machine. The teams are energized, having fun, and driving results better than our expectations at the start of the year. Strong operational execution, restructuring and cost actions, and early commercial excellence momentum drove a majority of the upside relative to our January guidance, reinforcing our confidence in both the quality of the businesses and our integration playbook.

Margins across the acquired businesses were substantially improved from last year and ahead of our plan, and we see opportunity for continued progression in the quarters ahead. More specifically, we now expect the margin and earnings contribution from the acquisitions to be more evenly weighted throughout the year compared to our prior expectation of back-half-weighted performance. Based on what we are seeing today, we now expect accretion for the full year to be at least double what we communicated in January, or about 15 cents of EPS. My confidence in exceeding our target ROIC by year five has only increased over the last few months.

I am so proud of all our new associates that have joined Crane this year, and I am excited to see how we will continue to take these outstanding brands in the future. We are already moving beyond just the tactical integration actions and are well on our way with strategy deployment, painting a very exciting future for everyone, including our shareholders. Turning to Aerospace and Advanced Technologies, we continue to see strength across the aerospace and defense demand environment. The backlog we built, along with the new programs and opportunities our Aerospace and Advanced Technologies teams have secured, continue to provide us with great visibility well beyond 2026.

Looking to the balance of the year, we continue to expect full-year core sales growth for the segment to land at the high end of our long-term 7% to 9% range. On the commercial side, OE activity remains healthy, with Boeing continuing with strong production rates. Commercial aftermarket revenue was down as expected in the quarter due to unfavorable year-over-year comparisons, while commercial aftermarket orders were up 11% in the quarter. While we have not seen an impact to orders at this time, given the geopolitical situation, elevated oil prices, and long-haul travel disruption through the Middle East, we could see an impact to commercial aftermarket as the year progresses.

However, even factoring in a decline in commercial aftermarket, we remain confident in our 7% to 9% sales growth range leveraging at 35% to 40%. Richard will provide more details on how we are thinking about this. On the defense side, there has been a lot of activity and interesting industry announcements over the past few weeks. Procurement spending remains solid, and there is a continued focus on strengthening the broader defense industrial base given the heightened global uncertainty we continue to see.

We are seeing significant demand signals across both missile defense and radar applications, among other areas in our portfolio, further strengthening the long-term outlook, with the potential for some benefit this year depending on order timing and lead times. In the quarter, we received strong orders for the PAC-3 program and remain under negotiations for similar wins. Additionally, we received incremental orders for LTAMDS and are currently under negotiations for additional contracts with other providers.

We fully anticipate additional orders in these two defense growth areas as we move through the year, and beyond this, we continue to develop new technologies, win new business, and pursue additional opportunities across this segment that give us confidence we will deliver above-market growth for the rest of the decade. Particularly on the defense side, we expect replenishment of military aircraft spares and missiles along with continued demand for ground-based radar systems, all extending the period of strong demand for years. We are very confident in yet another outstanding year at Aerospace and Advanced Technologies. At Process Flow Technologies, it was another solid quarter and we remain well positioned to consistently outgrow our markets across the cycles.

We have deliberately repositioned the portfolio around our core end markets—pharmaceuticals, wastewater, cryogenics, chemicals, and nuclear power—where we hold strong competitive positions and differentiated capabilities that support sustainable market outperformance. Overall demand for the quarter came in slightly ahead of our expectations, and execution was strong, driving a 50-basis-point improvement in adjusted margins even with the dilutive impact of acquisitions. On the order side, power generation remained a key area of strength. We also saw solid project activity in pharma tied to U.S. capacity expansion, continued momentum in cryogenics driven by capacity needs within the space launch segment, and strong orders in LNG.

In nuclear, as part of the Holtec Palisades restart, we were able to add value by extending contract terms. With respect to the ongoing conflict, note that only about 5% of PFT segment sales are directly exposed to the Middle East. While we are continuing to ship today and overall demand in the region in the quarter was on track, we do see projects moving to the right and potentially impacting the balance of 2026, along with some shipment lane disruptions. Notably, we are not seeing cancellations. Longer term, we do see incremental opportunities for rebuilding as the geopolitical environment stabilizes.

Even with this uncertain backdrop, we continue to invest for long-term growth through disciplined execution of our multiyear technology and new product development roadmaps, along with ongoing commercial excellence initiatives, all supported by strong and consistent operational execution. Tactically, we have proven our ability to respond quickly to changes in demand. We will remain nimble during this period, taking appropriate pricing and cost actions as needed. For the full year, we still expect core growth to be consistent with our initial guidance of flat to low single digits, leveraging within our target range of 30% to 35%. In summary, a really solid start.

Our strategy is unchanged, and we remain focused on managing through any near-term demand variability without losing sight of our long-term objectives. Taken together, our businesses remain exceptionally well positioned to continue delivering strong results. We also continue to see significant opportunity to further enhance performance through acquisitions. Our balance sheet remains exceptionally strong, with substantial available M&A capacity. We continue to pursue our robust pipeline of potential opportunities. M&A activity has not slowed, and we are actively engaged on a number of opportunities across both Aerospace and Advanced Technologies and Process Flow Technologies. While there is nothing imminent at this point, our pipeline remains healthy, and we remain disciplined and selective as we evaluate potential transactions.

Before turning the call over to Richard, I want to emphasize that while external conditions remain dynamic, our focus has not changed. We remain disciplined in the areas we control—execution, customer focus, cost improvement, development of our people, and continued investment in our growth initiatives and technology roadmaps. We believe this approach positions Crane Company to outperform our end markets and create long-term shareholder value. Regardless of near-term volatility, over the long term, our approach remains consistent.

We will deliver 4% to 6% long-term core sales growth through the cycles from resilient and durable businesses with solid aftermarket, substantial operating leverage on top of already solid margins today that should lead to double-digit average annual core profit growth, with significant upside from capital deployment. Now let me turn the call over to our CFO, Mr. Richard A. Maue, for more specifics on the quarter.

Richard A. Maue: Thank you, Alejandro, and good morning, everyone. Wow, what a start to the year. Let me start off with total company results. Total sales were up 25% in the quarter compared to last year, with 4% core growth driven primarily by the ongoing strength within the Aerospace and Advanced Technologies segment. Sales from acquisitions contributed 18% in the quarter, which was modestly above expectations, reflecting strong execution as these four new businesses become a part of the Crane machine. Adjusted operating profit increased 29%, reflecting the impact of the higher core sales, contribution from the acquisitions, and productivity and favorable price net of inflation—truly outstanding results.

Total core FX-neutral backlog was up 9% compared to the first quarter last year, reflecting continued strength at Aerospace and Advanced Technologies, and core backlog was up 3% sequentially driven primarily by Process Flow Technologies. Core orders were down 5% year-over-year, but were modestly better than we expected. The decline was entirely driven by an unfavorable comparison within Aerospace and Advanced Technologies; a 15% decline reflected the record first-quarter orders last year in this business, which included several multiyear orders that we highlighted to you last April. Core orders in PFT increased 5% compared to last year, and core backlog in PFT was up 7% compared to December.

Backlog and orders across the acquisitions were also solid, coming in modestly above our expectations, continuing to support a strong full-year outlook. From a balance sheet perspective, we ended the quarter with pro forma net leverage at 1.4 times, leaving us well positioned for further M&A, as Alejandro noted. A few more details on the segments in the quarter. Starting with Aerospace and Advanced Technologies, sales of $318 million increased 28% in the quarter, with core sales up 9.4%. Our backlog of nearly $1.2 billion increased 14% on a core basis and increased 24% including Druck. On a sequential basis, core backlog increased 2% with total backlog up 11%—again, no surprises and at record levels. Demand remains strong.

We are seeing increasing RFP and RFQ activities across several defense programs supporting missile defense and ground-based radar, some of which reflect recent wins at some of our defense customers, giving us further confidence in our multiyear outlook. Let me spend a minute on the core business in the quarter. On the OEM side, sales were strong, up 16%, with commercial OEM up 20% and military up 10%. Total aftermarket was down 2% in the quarter, with military aftermarket posting a very strong increase, up 28% in the quarter, reflecting the breadth and strength of our portfolio. That military strength was offset by commercial aftermarket, which was down 13% as expected.

Specific to commercial aftermarket, shipments were largely in line with what we expected for Q1 but with an unfavorable comparison against higher initial provisioning in the prior-year first quarter. Even with that decline, we came in above our growth expectations for the quarter. Of note, commercial aftermarket orders in the quarter were up 11% year-over-year and 10% sequentially. While we have not seen any impacts to orders so far resulting from the ongoing conflict, elevated oil prices and disruptions to long-haul travel through the Middle East could create pressure on commercial aftermarket as the year progresses. We are factoring into our guidance that commercial aftermarket could decline on a full-year basis.

Taken altogether though, we remain very confident in our full-year segment sales outlook. We continue to expect total core sales growth at the high end of our 7% to 9% algorithm. While the mix across sub-segments may shift as the year plays out, our overall guidance is unchanged and that really speaks to the diversity and durability of our Aerospace and Advanced Technologies portfolio. Adjusted segment margin of 24.6% compared to 26.2% last year, primarily reflecting the impact of the Druck acquisition. This was an outstanding result and nearly 200 basis points better than we expected given Druck outperformance in the quarter as well as continued strong performance in our core AAT business.

At Process Flow Technologies, in Q1 we delivered sales of $378 million, up 23% compared to a year ago, with core sales down 0.6%—slightly better than we anticipated—with the acquisitions of Panametrics, Reuter-Stokes, and OPTECH Danielote adding 19 points of growth, and FX contributing four points of growth in the quarter. Compared to the prior year, FX-neutral backlog at PFT decreased 2.5%, but on a sequential basis improved a solid 7%. In addition, core FX-neutral orders were up 5%, also modestly above our expectations.

Adjusted operating margin of 22.1% was approximately 50 basis points above the prior year, and this was inclusive of the dilutive impact from the recent acquisitions and, like Aerospace and Advanced Technologies, results were above our expectations given better performance across our core businesses and each acquired business. Productivity is reading through as well as price net of cost. In the quarter, the impact from the conflict in the Middle East was nominal. As Alejandro mentioned, we have just under 5% of total exposure in-region on a full-year basis. We expect projects to move to the right, and we do expect notable freight and other inflationary headwinds as we move through the balance of 2026.

Our teams are already executing to ensure no net inflation risk to the P&L inclusive of margin impacts. In summary, we continue to expect core operating leverage for the segment between 30% to 35% for the full year. Moving to the non-operational items below the segments, corporate expense for the quarter was $24 million, slightly lower than our expectations. Recall, we anticipated corporate expense to be highest in Q1 due to accounting rules that require accelerated amortization of stock-based compensation expense for associates that are retirement eligible. For 2026, we continue to forecast corporate expense to be in the range of $80 million to $85 million.

Given the funding for the acquisitions of Panametrics, Druck, Reuter-Stokes, and OPTECH Danielote, net non-operating expense in the quarter was $15 million, and we continue to estimate full-year 2026 net non-operating expense of approximately $58 million. Lastly, we continue to expect our tax rate for 2026 to approximate 23%. Taking all of this into account—our performance to date as well as the risks and opportunities we see ahead—as Alejandro mentioned, we are raising our adjusted full-year guidance by 10 cents to a range of $6.65 to $6.85, again reflecting what we have clear line of sight to and a high level of confidence in delivering.

Looking at the cadence of quarterly results for the year, we expect Q2 to be similar to Q1, and our full-year earnings split to now be more balanced at around 49% to 51% between the first and second half given the strong Q1 performance. The second-half earnings performance is expected to be more evenly balanced relative to our historical quarterly cadence of a sequential decline from Q3 to Q4, given the expected performance of our recent acquisitions. We began the year with performance that exceeded our expectations, underscoring the strength of our teams, our strategic direction, and our execution. We remain committed to building on that momentum and consistently delivering results.

You know, Alejandro, all the uncertainty that everyone is talking about this earnings season reminded me of a notable quote from the Academy Award-winning actor Ryan Reynolds from the timeless movie classic National Lampoon’s Van Wilder: “Worrying is like a rocking chair. It gives you something to do, but it does not get you anywhere.” At Crane Company, leveraging our CBS machine, we are very intentional and focused on what is in our control no matter what the environment, and we always view periods of uncertainty as periods of opportunity. And with that, operator, we are now ready to take our first question.

Operator: Thank you. The floor is now open for questions. We will take our first question from Amit Mehrotra. Please go ahead. Your line is open.

Amit Mehrotra: Thanks, operator. Good morning. I wish I had a good movie quote, but I will have to come up with one next quarter. Maybe starting with the progress you are making on PSI, which is obviously very, very strong and clear. Maybe just unpack where the upside is coming from across Druck, Panametrics, Reuter-Stokes. Obviously, you have had this target of getting from $60 million to $150 million over five years to hit that ROIC target. It seems like you are achieving that greater or even faster. Maybe you can just update us on timing with respect to that progression.

Alejandro A. Alcala: Good morning, Amit. Thank you for that question. Related to PSI, the quarter upside—I mentioned three areas. First, the execution of the three businesses was stronger than expected. Just as a volume standpoint, demand is stronger, execution has been very solid, so that created some upside. The cost actions—you may recall that we are taking two types of cost actions in the short term. One is eliminating the overall PSI layer, the management layer—we are really operating these three businesses—so that was executed very well. Then within the businesses, as we are executing product line simplification, there is realignment of resources and restructuring. The teams moved quite quickly in the quarter and we started to see some of that upside.

The third element is the beginnings of value pricing and commercial excellence that are starting to read through as we move, also at great speed. I expect that to improve during the year. Related to timing overall, this year we came in thinking on the top line the PSI set of businesses would be in the range of 4% to 6% growth. We are now thinking closer to the higher side of that range. And we were thinking we would improve 200 basis points of margin, and now we are thinking at least 300 basis points of margin. So we are ahead of schedule of our plan, which puts us overall in that five-year timeline really gaining ground.

We are very confident in overdelivering to those benchmarks.

Amit Mehrotra: Great, thank you for that. And just maybe as a follow-up, can we talk about PFT core order improvement? Obviously, very strong sequentially. Is it enough to call an inflection in the process flow cycle? Where are you seeing the strongest momentum across the various regions and end markets? If you could just double click on that in terms of what you are seeing in that momentum.

Alejandro A. Alcala: On orders for PFT, the strength has come in some markets that we have been highlighting in the past and that has continued. I think that will continue through the year—power generation in the Americas, pharmaceuticals, cryogenics, wastewater in particular gave us the upside. That has been pretty consistent. Interestingly, we do not see those segments impacted by higher energy prices, so we think demand will remain solid through the year. Chemicals has continued to be sluggish, at a trough holding, but I would not call it an inflection point yet until we see that piece of the business changing.

Historically, higher energy prices have led to increased demand in that chemical segment, but it takes a while to read through, particularly in the Gulf, where customers see that benefit of feedstock between gas and oil. Even though end-customer demand may be slower, it still makes sense to invest and expand capacity, debottlenecking, and so forth. So I think it is solid—better than we expected going into the year—and we feel better about the prospects than we did three months ago, but not quite calling an inflection, especially on chemicals.

Amit Mehrotra: Great. Thank you very much. Congrats on the good results. Appreciate it.

Alejandro A. Alcala: Thank you. Thank you, Amit.

Operator: Thank you. We will take our next question from Matt J. Summerville of D.A. Davidson. Please go ahead. Your line is open.

Matt J. Summerville: Thanks. A couple questions. Can you comment on the magnitude of EPS accretion you witnessed as it pertained to the acquisitions and specifically what you have done to drive near-immediate linearity in those businesses, which last conference call were sort of deemed to be quite second-half loaded overall? And then I have a follow-up.

Richard A. Maue: Yes, so we did see some accretion in the quarter, as Alejandro mentioned. Given the results, we feel like we are going to see at least double what we thought on a full-year basis. Coming into the year, we had about an 8-cent number in mind, and we felt comfortable today saying that we would see a full year of 15 cents. We did see a portion of that here in the first quarter. I would not say it is necessarily linear, but perhaps close. That would be the overall impact and how we are feeling about the business.

Alejandro A. Alcala: To add, Matt, on the cost actions that we took, we were able to execute faster than we had originally planned. That creates not only upside for the year, but also more balanced earnings through the year. That said, as some of this backlog with improved pricing reads through, we still expect to see some gradual improvements from the acquisitions as the year progresses.

Richard A. Maue: Yes, the only other thing I would add is that we saw a little bit more in the way of volumes being stronger as well, in particular for Druck.

Matt J. Summerville: Understood. Thank you for that. Maybe expand on the actionability you are seeing in the M&A pipeline. Can you handicap whether you see more deals getting over the finish line before the end of the year into the early part of 2027? And is the average deal size starting to mount higher, maybe more similar in nature to the size of PSI, as an example?

Alejandro A. Alcala: Activity in M&A opportunities continues to be quite strong. There is a lot happening. We are involved in several processes on both segments. It is a range of sizes. We have commented before that our sweet spot is around that $500 million of value, but there are deals smaller than that we are looking at that seem quite interesting as bolt-ons, and there are some deals a little bit bigger than that also look interesting. It is a bit opportunistic. We will remain disciplined. We will see how the year plays out. As far as activity and focus, there is quite a bit happening.

Richard A. Maue: I think that sums it up. From a complexity and bandwidth perspective, everything we are looking at—nothing is going to cause us to hesitate in the way of resource constraints.

Matt J. Summerville: Understood. Thank you, guys.

Operator: Thank you. We will take our next question from Jeffrey Todd Sprague with Vertical Research. Please go ahead. Your line is open.

Jeffrey Todd Sprague: Hey, thanks. Good morning, everyone. I wanted to come back to the comments about aero aftermarket. I completely understand it could fade as the year progresses given what is going on, but it is a little unclear what you are actually doing with your guidance. Are you saying it could be weaker but you can make it up elsewhere, or have you dialed in a decline in aftermarket in the way you have guided the year here?

Richard A. Maue: Thanks, Jeff. Maybe a little perspective to start as well. If you remember when we came into the year and initially issued our guidance for commercial aftermarket, we were, I would say, on the lower end of what the rest of the industry was projecting—something like mid-single-digit growth—and we did get a lot of questions back on that. Here we are a quarter later and we see the headwinds in the marketplace, potentially from the Middle East conflict and so forth, and we are basically saying we are going to guide down. So our guidance reflects a down number for commercial aftermarket.

Now when you consider what our initial guide was, the move—and you can all do the math—it is not a big number overall. In terms of offset, what we are seeing is a pretty considerable demand increase in military, in particular in spares. Aftermarket was up 28% in the quarter. We have the incremental benefit that comes in the second quarter through the balance of the year in the F-16 brake control upgrade program.

So when you step back and look at the overall complexion of our aftermarket and where we are coming from off the first guidance number that we put out in January, we feel highly confident that we are going to offset even in this revised down outlook for commercial aftermarket.

Alejandro A. Alcala: If it plays out differently, Jeff—aftermarket demand has been resilient post-COVID, as you know, to higher energy, and travel has been resilient—but if it plays better than our assumption, then that is an opportunity for us, an upside. We felt comfortable assuming a more conservative view because we have the offsets already with line of sight in our backlog.

Jeffrey Todd Sprague: Great. Very clear. And then back to PSI: to what degree have you seen the commercial front end of the business change? These are very good businesses but “orphan,” so to speak, inside a larger organization. Are you seeing better order intake or inquiries in some of those businesses than you might have otherwise expected, or is the upside more about pricing and cost actions you already elaborated on?

Alejandro A. Alcala: On the commercial side, there have been significant changes in how we operate, which projects we go after, and how we go after them. We are being more successful in winning target projects that are more interesting and more profitable for us, very quickly. Also around our pricing practices—value pricing—those would be the primary areas where we are starting to see differences. We had a six-month period to really prepare and ramp up, and those are the areas we have been able to impact shortly.

Now we are starting to work the strategies of longer-term growth which were never baked into our model, and we think there is upside even to the numbers that we talked about as those initiatives develop.

Jeffrey Todd Sprague: Maybe just a quick unrelated one: do you have plenty of capacity in your defense businesses for these missile-related ramps, or should we expect some more capacity going in to ride this wave?

Alejandro A. Alcala: We have plenty of capacity. Richard and I just did a deep-dive review with the team a few weeks ago. We are very well positioned. I think the pacing item in the industry will be more with the primes. We can significantly outpace the ramp-ups of the manufacturers of the actual missile. We are in pretty good shape there.

Jeffrey Todd Sprague: Great. Thank you.

Operator: Thank you. We will take our next question from Justin Ian Ages with CJS Securities. Please go ahead. Your line is open.

Justin Ian Ages: Hi, good morning all. You mentioned chemicals still sluggish, holding at trough levels, and I just want to know how that fits into the broader commentary you gave about seeing some PFT projects being pushed out. Is that chemical being pushed out, or have those already been pushed out, so no change in the timeline there?

Alejandro A. Alcala: The pushouts that we commented on were specific to the Middle East dynamic, and it is really related to the conflict where some of the petrochemical areas or refineries have been shut down temporarily. Some of that activity has pushed out to the right—no cancellations. That is very unique to that region and that conflict. As we started Q2, we started seeing those things begin to move a little bit faster than I thought they would. That said, in our guidance, we did factor in some delays in projects in that region—the Middle East—from a conservative standpoint. If it moves faster, then again it will be a positive for us.

More broadly in chemicals, with higher oil prices we expect the Gulf at some point to see some momentum in projects. That will take several quarters. We are starting to see a little bit of MRO activity pick up, particularly in the Americas, which usually precedes project investments later in the year going into next year.

Justin Ian Ages: Thanks for that, Alex. And then staying in PFT, you mentioned good performance in cryo. Can you give us some color on the size of that space and the market opportunity there?

Alejandro A. Alcala: Our cryo business today is about 4% to 5% of total PFT, but it is growing at mid-teens—15%, 16%, 17%—so it is growing quite fast. It is mainly Americas-based, servicing very high-growth markets like space launch—commercial space launch is increasing significantly. Supporting that launch platform, not on the actual rockets or aircraft but on the launch infrastructure, is where we are seeing a lot of demand. Also supporting general aerospace environmental testing—so as aerospace keeps ramping up, the investments in infrastructure for testing—pharmaceuticals and other areas, semiconductors as well. These are very interesting markets, high growth, and growing at a fast pace. This is an area that has been part of our transformation.

We basically went from zero a few years ago to 4% to 5% now, a combination of organic and inorganic actions.

Justin Ian Ages: That is great. I appreciate you taking the questions.

Operator: Thank you. We will go next to Scott Deuschle with Deutsche Bank. Please go ahead. Your line is open.

Scott Deuschle: Hi, good morning. Alex, what are the most PMI-sensitive parts of PFT, and are you seeing any uptick in demand in those PMI-sensitive businesses, or is it more just areas like pharma and cryo and nuclear?

Alejandro A. Alcala: Our biggest uptick has been power generation, which is right now driven by the investment in data centers—that is not, I think, PMI-related. Pharma, cryo, wastewater—we did see pretty solid general industrial activity in the quarter. We did not call it out, but it was a little bit stronger than we expected going into the year.

Richard A. Maue: Yes, I would say that general industrial portion of the market is where we are seeing a little improvement, Scott.

Scott Deuschle: That helps. You have described PFT as being pretty early cycle. If the broader industrial cycle is turning as the PMI data suggests, why would it just be a small benefit to your general industrial business?

Alejandro A. Alcala: The activity we saw there was mid-single-digit type growth. In the industrial spaces, that is pretty healthy activity. We will see how things progress, but we were pleased with how it started the year.

Scott Deuschle: Okay. And then, Alex, how large is the PAC-3 product line for Crane today? If not material now, could it become material if it grows 200%?

Alejandro A. Alcala: We look at the whole missile platform, which is the number I have in my head—it is around that $30 million to $40 million range of microwave and modular power product lines. I would use $30 million to $40 million as the jump-off point, and the projections are from 2x to 4–5x growth from now to 2030.

Richard A. Maue: PAC-3 would be towards the top end of the programs. We have maybe 12 or so programs that we are watching closely, and that would be one of the ones at the top, Scott.

Scott Deuschle: Thank you. Then, Alex, can you give us a sense as to how much of PFT’s cryo sales are related to the space market, and will that space growth within cryo correlate with SpaceX’s launch cadence over the coming years?

Alejandro A. Alcala: On space launch, it is about 35%. If you then include aerospace in general, you are looking more like 45%, and the balance is other industrials like pharma and so forth. The growth does correlate with launch activity, which is increasing—not only SpaceX, but other companies like Blue Origin and so forth. We service, I think, six or seven key customers of ours in that space launch ecosystem, and it is growing in line with the space launch activity.

Scott Deuschle: Thank you.

Operator: Thank you. We will take our next question from Myles Walton with Wolfe Research. Please go ahead. Your line is open.

Myles Walton: Thanks. Good morning. On the commercial aftermarket, are you reducing the outlook because of what you are seeing or because of what you anticipate seeing? Any color as it relates to recent bookings trends—the 11% growth in orders versus the 13% decline in revenue in the quarter would not suggest you are seeing much—so maybe just add color if you are doing this based on what you are seeing or what you anticipate you will see.

Alejandro A. Alcala: Historically over the last 15 years, high energy prices pre-COVID and post-COVID are two different stories. Pre-COVID, there was a pretty strong correlation—higher energy prices, higher airfare, lower activity demand. Post-COVID, we saw a big spike in energy prices in 2022 with the Ukraine conflict, and demand was very resilient. There was no slowdown from there. We are not sure what is going to happen. We have not seen any decline—as Richard mentioned, orders were up 11%, and also up sequentially. However, as we look forward and consider the industry’s general concerns, we wanted to think through a range of scenarios that would give us a lot of confidence in our guide.

Based on that, we assumed a decline in our guide to have really high confidence. But it could sustain, and that would be upside for us.

Richard A. Maue: I think that sums it up.

Myles Walton: Relative to the decline, you were thinking mid-single-digit positive before, and now you are conceptually thinking mid-single-digit decline is what you are baking in from a conservative viewpoint. Is that right?

Richard A. Maue: Yes, I think that is fair.

Myles Walton: Great. And then on PFT core, as you look to the rest of the year given the strong orders in the first quarter, are you able to see the turning to get to low-single-digit positive organic growth for PFT in the second quarter?

Alejandro A. Alcala: For the year, we are still expecting flat to low-single-digit. For the quarters, I would think Q2 is maybe a little bit consistent with Q1.

Richard A. Maue: Yes, if you are looking just sequentially, think of it as not that different from Q1 into Q2, without having the FX in front of me. That is the way we are thinking about the overall absolute number.

Myles Walton: And one last one: what is the downward pressure on margins for the rest of the year versus the 23.2% you did in the first quarter?

Richard A. Maue: We mentioned on the call we are starting to see inflation on commodities as well as freight. Earlier in the year, you have a backlog that you are getting through, but just from a timing perspective, we see the opportunity to get more price to offset as we move through the balance of the year and we get through that backlog. That pressure is modest, but something that we are working through, with overall suggesting an increase net to the margins.

Alejandro A. Alcala: So for the full year, improved margins versus last year.

Richard A. Maue: Yes, we are saying about a half a point improved overall margin profile. If you are comparing the first quarter versus the implied next three quarters, the next three quarters are slightly down versus the first quarter, and that is basically the same answer—it is going to be that inflationary pressure.

Myles Walton: Got it. Thank you.

Operator: Thank you. We will take our next question from Nathan Hardie Jones with Stifel. Please go ahead. Your line is open.

Nathan Hardie Jones: Good morning, everyone. I will do a couple on the acquisitions. Alex, you talked about moving to the strategy deployment phase on the acquisitions. I think you talked a little bit about shifting the focus to growth initiatives. Could you provide a little more color on what that involves for each business?

Alejandro A. Alcala: To be clear, Nathan, none of this was baked into our model—it is all upside. For Druck, some of the opportunities we saw were in military/defense. Druck has a good position in Europe and not really any position of note in the United States defense, where our legacy Aerospace and Defense business has strength. We are building strategies to create those synergies and growth. There are various regional differences in penetration and share, also in channel versus direct in Europe and the U.S., that we are working through.

For Panametrics, we see more opportunity in the Americas to grow; they have a lower share in the Americas than average, so there is opportunity there in aligning those efforts from a commercial standpoint. For Reuter-Stokes, we have a very strong position in the power generation piece of nuclear, but we also have product lines around other platforms of radiation monitoring and homeland security, so we plan to build on those platforms as well and grow. Those are some of the things we are thinking about from a strategy deployment standpoint.

Nathan Hardie Jones: Thanks. My second question is on the value-based pricing that you are already beginning to realize. I know some of these businesses have longer-term contracts. Maybe talk a little bit about where you are seeing value-based pricing, where you will see it in the future, and any color you can give us around that.

Alejandro A. Alcala: The longer-term contracts are probably less than you would think. For Druck, about 30% of the business is on longer-term contracts, so there are a lot of areas where we can move more quickly. For the Reuter-Stokes part of the business, it is about 40%. Some of these are naturally coming up and being renegotiated. For Panametrics, the longer-term contract exposure is very low. All in all, there are a lot of opportunities within the year, and then as we continue to work the longer-term contracts. We are very confident in our ability to keep improving these margins through the year and going into next year.

Nathan Hardie Jones: Thanks very much for taking the questions.

Operator: Thank you. We will take our next question from Ronald Epstein with Bank of America. Please go ahead. Your line is open.

Jordan J Lyonnais: Hey, good morning. This is Jordan Lyonnais on for Ron. Thanks for taking the question. On the balance of the year for commercial aero, if we are going to see aftermarket decline in the guide, how should we be thinking about margins for the segment? And for PFT, are you factoring in or do you have any concerns on the new tariffs that are going through on raw materials?

Richard A. Maue: Good question. On margins overall, when you look at that mix differential, I would step back and say our portfolio in Aerospace and Advanced Technologies—when we say commercial OE, we make money on commercial OE. Our model, as you know, is different from others in the industry. So when we do mix up and down, yes, there is some impact, but not as drastic as maybe in other companies. Specific to the commercial aftermarket coming down in our guidance, when we look at what we are seeing in military moving in the opposite direction, the margin profiles are not that far off, frankly—they are quite similar.

So that mix change is not going to be as significant, if at all, from a margin pressure point of view. In PFT with respect to tariffs, I would say the overall tariff change has not been all that material to us so far in the year or for the year. The one area I would point to is with the refund process—to the extent that we are successful there, we will of course call that out in the balance of the year, but none of that is factored into our guidance. No upside is factored into our guidance.

Jordan J Lyonnais: Got it. Thank you.

Operator: Thank you. This concludes the Q&A portion of today’s call. I would now like to turn the floor back over to Alejandro A. Alcala for closing remarks.

Alejandro A. Alcala: Thank you all for joining us today. Over the past 13 years, Crane Company has undergone a meaningful transformation—reshaping the portfolio, significantly improving margins and growth, and delivering strong shareholder value under Max’s leadership. That foundation positions us exceptionally well for what comes next. This transition is not a change in direction; it is the next phase of the same journey. It is about acceleration of profitable growth. Looking ahead, I am more excited than ever about Crane Company’s future and the opportunity to continue delivering for our customers, our communities, and our shareholders.

We will remain focused on executing our strategy, leveraging the Crane Business System to drive strong organic growth while continuing to pursue our disciplined approach to accelerating inorganic growth. I have had the privilege of working alongside an extraordinary team across the globe, and I am energized by the path ahead. With this team, this strategy, and this portfolio, I am confident that the best chapters of Crane Company are still in front of us. Thank you all for your interest in Crane Company and your time and attention this morning. Have a great day.

Operator: Thank you. This concludes today’s Crane Company First Quarter 2026 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.