Crane (CR) Q2 2025: Aerospace Backlog Jumps 29%, Accelerating Multi-Year Growth Visibility
Crane’s aerospace and electronics backlog surged 29% year-over-year, reinforcing the company’s multi-year growth runway and supporting a guidance raise despite ongoing macro uncertainty. Strategic M&A, led by the PSI acquisition, is set to further enhance portfolio differentiation and margin potential. Management’s capital deployment discipline and segment realignment signal a sustained focus on high-value, resilient end markets heading into 2026.
Summary
- Aerospace Order Momentum: Record aerospace and electronics backlog points to durable demand and multi-year program wins.
- M&A Integration Playbook: PSI acquisition expands sensor and nuclear capabilities, with clear plans for margin uplift.
- Portfolio Realignment: Segment leadership changes and targeted adjacencies position Crane for above-market growth through the decade.
Performance Analysis
Crane’s second quarter results were anchored by 6.5% core sales growth, with aerospace and electronics (A&E) driving the majority of the upside. Adjusted operating profit rose 15%, supported by strong net pricing and productivity improvements. The A&E segment delivered 12% sales growth, nearly all organic, and achieved a record 26.3% adjusted margin—up 250 basis points year-over-year—reflecting a favorable mix and scale benefits. Notably, the A&E backlog reached a record $1 billion, up 29% year-over-year and 9% sequentially, signaling robust demand across both commercial and military programs.
Process Flow Technologies (PFT) posted 7% sales growth, aided by recent acquisitions and steady core demand in cryogenics and water/wastewater, while chemical end markets remained soft but stable. Backlog in PFT contracted modestly, but order intake remained positive, especially in high-growth niches like space launch and biopharma. Crane’s net cash position and post-PSI leverage of 1x EBITDA underscore ample balance sheet flexibility for further acquisitions and investment. Tariff headwinds moderated versus prior expectations, with management reiterating their ability to offset impacts through pricing and productivity levers.
- Aftermarket Strength: Total A&E aftermarket sales rose 18%, with military up 37% and commercial up 9%, underpinning margin expansion.
- Segment Margin Expansion: PFT delivered 20.7% adjusted margin, with core operating leverage at the top end of the targeted range.
- Tariff Management: Anticipated gross tariff cost for 2025 was cut in half versus last quarter, now expected at $30 million, with price actions offsetting most headwinds.
Overall, Crane’s results reflect disciplined execution, with both organic and inorganic growth levers contributing to a robust outlook and increased earnings guidance for the year.
Executive Commentary
"Our backlog, consistently strong execution, and our performance year-to-date gives us the confidence to raise our full-year adjusted earnings outlook to a range of $5.50 to $5.80, up from our prior view of $5.30 to $5.60."
Max Mitchell, Chairman, President, and Chief Executive Officer
"Adjusted operating profit increased 15%, driven by strong net price and productivity. In the quarter, core FX neutral backlog was up 18% compared to last year, driven by continued outsized strength at aerospace and electronics."
Rich Maui, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Aerospace and Electronics: Multi-Year Demand Visibility
Crane’s A&E segment is capitalizing on secular tailwinds in both commercial aerospace and defense, with record backlog fueled by broad-based order strength. Key program wins—such as contracts for air defense systems, the COMAC C929, and the F-16 brake control upgrade— extend demand visibility well into 2026-2027. Management expects high single to low double-digit core sales growth for the year, with operating leverage of 35% to 40%.
2. Precision Sensors and Instrumentation (PSI) Acquisition: Portfolio Differentiation
The $390 million PSI deal (Druk, Panametrics, Rotostrokes) adds proprietary sensor and nuclear technology, deepening Crane’s exposure to mission-critical, high-margin niches. Integration will follow a proven playbook focused on operational discipline, commercial excellence, and targeted investment, with a clear path to 10% return on invested capital (ROIC) within five years. Segment leadership changes signal readiness for further bolt-on deals and adjacencies.
3. Process Flow Technologies: Resilience in Niche Markets
PFT continues to outgrow sluggish end markets by concentrating on differentiated applications—cryogenics for space launch, high-spec valves for chemicals, and water/wastewater infrastructure. Recent acquisitions and organic investments have shifted the portfolio toward higher-growth, less cyclical segments, with regional strength in the Middle East and North America offsetting European chemical softness.
4. Capital Deployment and M&A Pipeline
Crane’s net cash position and low leverage provide ample firepower for continued M&A, with a robust funnel spanning both A&E and PFT. Management remains disciplined, balancing near-term bolt-ons with larger, transformational opportunities in sensing and test/measurement adjacencies.
5. Organizational Alignment for Growth
Segment realignment and leadership promotions (notably Jay Higgs at A&E) mirror Crane’s successful PFT structure, enabling more agile integration of future acquisitions and sharper focus on strategic initiatives. This organizational model is designed to accelerate both organic and inorganic growth across platforms.
Key Considerations
This quarter marks a pivotal step in Crane’s portfolio transformation, with the PSI acquisition and segment realignment aimed at sustaining above-market growth and margin expansion through the cycle.
Key Considerations:
- Backlog Durability: Record A&E backlog underpins multi-year revenue visibility and reduces near-term demand risk.
- Margin Expansion Playbook: PSI integration targets significant margin uplift, leveraging Crane’s CBS (Crane Business System) operational framework.
- Tariff and Cost Pass-Through: Management’s ability to offset tariff headwinds through pricing and productivity has been tested and proven, but remains a key watchpoint as macro conditions evolve.
- End Market Mix Shift: Ongoing portfolio repositioning favors resilient, less cyclical sectors such as defense, space, and water infrastructure.
- M&A Execution Risk: Success of the PSI integration and further acquisitions will be critical to delivering targeted returns and sustaining the growth narrative.
Risks
Crane faces ongoing demand uncertainty in chemical and European end markets, with project delays rather than outright cancellations. Tariff volatility and raw material cost swings could pressure margins if not fully offset by price. Execution risk around large-scale M&A integration, particularly with PSI, remains a critical variable for future returns. Regulatory changes in R&D tax and CapEx deductibility may introduce modest cash flow variability, but are not expected to materially impact strategy.
Forward Outlook
For Q3 2025, Crane guided to:
- Continued strong A&E sales, with a mix shift toward commercial OEM and moderating aftermarket comps.
- PFT core growth at the lower end of low-to-mid single-digit range, with volume leverage at 30% to 35%.
For full-year 2025, management raised guidance:
- Adjusted EPS now expected in the $5.50 to $5.80 range.
Management emphasized record backlog, robust M&A pipeline, and organizational alignment as key drivers for sustained outperformance. Tariff and cost pass-through, as well as continued segment margin discipline, remain central to outlook confidence.
- Backlog strength supports multi-year growth trajectory
- PSI integration expected to be accretive within several years
Takeaways
Crane’s Q2 results and strategic moves reinforce its transition toward a higher-quality, more resilient portfolio.
- Aerospace and Electronics Backlog: Multi-year program wins and record backlog provide rare revenue visibility and margin stability.
- Portfolio Differentiation Through M&A: PSI and similar deals expand high-value, sticky niches, with clear margin and growth upside if integration succeeds.
- Execution Watchpoints: Investors should monitor PSI integration, margin trajectory, and continued pricing discipline in the face of cost and demand volatility.
Conclusion
Crane’s Q2 showcased disciplined execution, with A&E backlog and strategic M&A setting up a multi-year growth runway. Portfolio repositioning and operational rigor keep the company well-insulated from near-term macro headwinds, though integration and cost management remain critical to sustaining outperformance.
Industry Read-Through
Crane’s results highlight the durability of demand in commercial aerospace, defense, and industrial sensing, with backlog and program wins suggesting continued sector strength even as some industrial end markets soften. Active portfolio management and disciplined M&A are increasingly necessary to counteract cyclicality and margin pressure in traditional industrials. Peers with exposure to defense, space, and high-spec process technologies are likely to benefit from similar secular tailwinds, while those reliant on European chemicals or undifferentiated flow control face greater risk. Tariff management and price discipline remain common themes for industrials navigating a volatile cost environment.