Crane (CR) Q3 2025: Aerospace & Electronics Backlog Jumps 27% as Defense Tailwinds Build
Crane’s third quarter showcased broad-based execution and a record 27% backlog surge in Aerospace & Electronics, reinforcing multi-year demand visibility. Process Flow Technologies delivered margin expansion despite chemical market softness, while the pending PSI acquisition is set to enhance portfolio strength and margin profile. Management’s guidance raise and bullish tone signal confidence in sustaining above-market growth into 2026, anchored by defense, infrastructure, and targeted M&A.
Summary
- Defense and Aerospace Backlog Momentum: Multi-year funded program wins and OEM demand drive record visibility.
- Margin Expansion Amid Tariff Headwinds: Process Flow Technologies leverages innovation and pricing power to offset cost pressures.
- PSI Acquisition Integration: Management expects rapid margin and growth accretion from the year-end closing.
Performance Analysis
Crane delivered 5.6% core sales growth in Q3, propelled by Aerospace & Electronics (A&E), which posted 13% sales growth and a record $1 billion backlog, up 27% year-over-year. The A&E segment benefited from robust OEM demand across both commercial and military channels, as well as a 20% increase in aftermarket sales. Segment margin for A&E expanded to 25.1%, a 160 basis point improvement, reflecting strong net pricing and productivity gains.
Process Flow Technologies (PFT), which now represents the company’s largest segment by sales, grew 3% with flat core performance, but drove a 60 basis point margin expansion to 22.4% through productivity and favorable mix. Despite chemical market softness and $30 million in tariff headwinds, PFT’s non-chemical businesses—wastewater, cryogenics, and pharma—delivered double-digit growth, aided by new product launches and reshoring tailwinds. The company’s balance sheet remains robust, with low net leverage and ample capacity for further M&A.
- Aerospace & Electronics Backlog Surges: 27% YoY growth in backlog, providing strong forward visibility into 2026 and beyond.
- PFT Margin Expansion: Productivity, innovation, and pricing offset tariffs and chemical market cyclicality.
- Cash Position and M&A Capacity: Net positive cash and new $900 million revolving credit facility position Crane for continued portfolio expansion.
Q4 margin guidance is modestly lower due to seasonality and less favorable aftermarket mix, but full-year leverage is expected to hit the upper end of the targeted range. Overall, Crane’s diversified end-market exposure and operational discipline continue to deliver consistent outperformance.
Executive Commentary
"Adjusted EPS was $1.64, driven by an impressive 5.6% core sales growth, primarily reflecting broad-based strength in aerospace electronics and continued strong execution of process flow technologies. This quarter's results yet again underscore our differentiated technologies and operational discipline."
Max Mitchell, Chairman, President and Chief Executive Officer
"Adjusted operating profit increased 19%, driven by continued strong net price and solid productivity. In the quarter, core FX neutral backlog was up 16% compared to last year, reflecting continued strength at aerospace and electronics, and core FX neutral orders were up 2%."
Rich Malley, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Aerospace & Electronics: Multi-Year Demand Visibility
Crane’s A&E segment is anchored by a record $1 billion backlog, reflecting funded wins in next-generation military demonstrator programs, OEM production ramp-ups at Boeing and Airbus, and sustained aftermarket demand. Defense funding priorities are now centered on programs where Crane holds key content, such as XM30, CTT, and missile defense systems, positioning the company for above-market growth through the decade. New product launches, such as the 200kW traction motor inverter generator, expand Crane’s footprint in vehicle electrification and tactical defense applications.
2. Process Flow Technologies: Margin Resilience and Portfolio Shift
PFT’s margin expansion is the result of a decade-long shift toward higher-value, less cyclical markets such as wastewater, pharma, and cryogenics. Double-digit growth in these areas is offsetting chemical market softness, which remains stable but lacks a clear recovery catalyst. Innovative product launches, such as the advanced non-clog wastewater pump, and commercial excellence in front-end engineering are shortening lead times and driving share gains. The business continues to leverage pricing and operational excellence to offset tariff and input cost pressures.
3. M&A and Portfolio Accretion: PSI Integration
The pending acquisition of Precision Sensors and Instrumentation (PSI) from Baker Hughes is set to close at year-end, with integration planning already well underway. Management expects PSI to be margin and growth accretive, leveraging the Crane Business System to drive operational improvements. The deal is being financed with a new $900 million term loan, leaving the revolving credit facility available for future acquisitions.
4. Capital Allocation and Balance Sheet Strength
Crane’s net leverage will remain just over 1x post-PSI, well below its 2-3x target range, preserving flexibility for additional M&A. The company’s disciplined capital deployment is supported by robust cash generation and a focus on high-return, bolt-on deals in both A&E and PFT segments.
5. Operational Agility and Automation Focus
While Crane is investing in targeted automation to address skilled labor shortages and enhance reliability, the company’s approach remains focused on specific high-impact tasks rather than full-factory automation. This pragmatic strategy supports productivity gains without overextending capital or disrupting the human-centric culture that underpins the Crane Business System.
Key Considerations
Crane’s Q3 underscores the benefits of a diversified industrial portfolio, strong execution culture, and disciplined capital allocation. The company continues to pivot toward higher-growth, less cyclical end markets while maintaining a robust M&A pipeline and integration discipline.
Key Considerations:
- Defense and Infrastructure Tailwinds: Record A&E backlog and new program wins provide multi-year growth visibility.
- Portfolio Repositioning Delivers Margin Gains: PFT’s shift toward wastewater, pharma, and cryogenics is yielding sustainable margin expansion.
- PSI Acquisition to Accelerate Growth: Management expects rapid accretion to both margin and growth from PSI integration.
- Tariff and Input Cost Management: Pricing power and operational agility are mitigating $30 million in annual tariff headwinds.
- Balance Sheet Flexibility: Net leverage remains conservative, supporting continued M&A and organic investment.
Risks
Crane faces ongoing risks from chemical market cyclicality, tariff volatility, and potential defense budget fluctuations. While management signals optimism about stabilization, a delayed recovery in chemicals or unexpected shifts in government funding could pressure growth. The integration of PSI also carries execution risk, though management’s track record and detailed planning reduce this concern.
Forward Outlook
For Q4 2025, Crane guided to:
- Seasonally lower margins in A&E due to mix and production hours
- Continued margin expansion in PFT despite flat core growth
For full-year 2025, management raised and narrowed adjusted EPS guidance to $5.75 to $5.95, reflecting 20% growth at the midpoint. Management highlighted:
- Strong backlog and pipeline support for 4-6% organic growth in 2026
- PSI integration to drive incremental margin and growth accretion
Takeaways
Crane’s third quarter results reinforce its multi-year growth trajectory, powered by defense and infrastructure demand, disciplined portfolio management, and strong operational execution.
- A&E Backlog Sets Multi-Year Growth Floor: Record backlog and funded program wins anchor forward visibility and margin leverage.
- PFT Margin Expansion Demonstrates Portfolio Transformation: Higher-value end markets and innovation offset cyclicality and cost headwinds.
- Watch for PSI Integration and Further M&A: Successful integration and continued capital deployment will be key drivers for 2026 and beyond.
Conclusion
Crane’s Q3 results and guidance raise reflect a business firing on all cylinders, with defense, infrastructure, and targeted M&A providing durable growth levers. Margin discipline, innovation, and capital flexibility position the company to outperform through macro cycles.
Industry Read-Through
Crane’s strong A&E backlog and defense program visibility signal sustained demand across the aerospace, defense, and power infrastructure sectors. The company’s ability to drive margin expansion in process industries despite chemical market softness highlights the value of portfolio repositioning and innovation. Other industrials exposed to defense, wastewater, or reshoring trends should see similar tailwinds, while those with outsized chemical exposure may face continued headwinds until a clear recovery emerges. The focus on selective automation and commercial excellence is a template for peers navigating skilled labor shortages and supply chain volatility.