Prepared remarks
Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, our team will be happy to help you; press zero. Please stand by. Your meeting is about to begin. Welcome to the Crane Company Second Quarter 2026 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode. To ensure others can hear your questions clearly, we ask that you pick up your handset for best sound quality. If you should need operator assistance, please press zero. I will turn the call over to Allison Poliniak-Cusic, Vice President of Investor Relations.
Thank you, Tasha, and good day, everyone. Welcome to our second quarter 2026 earnings release conference call. I am Allison Poliniak-Cusic, Vice President of Investor Relations. On our call this morning, we have Alex Alcala, President and Chief Executive Officer; and Richard Maue, our Executive Vice President and Chief Financial Officer, along with Jason D. Feldman, Senior Vice President, Treasury and Max H. Mitchell, who is on for Q&A. We will start off our call with a few prepared remarks from Alex and Richard, after which we will respond to your questions. As a reminder, the comments that we make on this 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 on Form 10-K 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 the accompanying slide presentation, both of which are available on our website at www.craneco.com in the Investor Relations section. Now let me turn the call over to Alex Alcala.
Thank you, Allison, and good morning, everyone. We delivered record second quarter results that reflected strong execution across the company and continued momentum across our portfolio. That excellent performance included solid 5% core sales growth, strong operating leverage and the continued benefits of our recent acquisitions. Momentum continues to build across the company. Total backlog increased 5% sequentially during the quarter, with core sequential backlog growth across both segments, providing further visibility and confidence as we move into the second half of the year. Aerospace and Advanced Technologies led the way, delivering 13% core sales growth driven by broad-based strength across both commercial aerospace and defense markets. Backlog also increased to a record of nearly $1.3 billion with core year-over-year backlog growth of 11%. At Process Flow Technologies, we delivered a second consecutive quarter of sequential core backlog growth, providing increased visibility and supporting our confidence in a strong second half. Execution remains excellent, with another quarter of adjusted operating margin expansion despite the temporary dilution from our January acquisition. Combined with positive and improving demand trends, this momentum positions us well for the second half and also as we head into 2027. Overall, operational execution was exceptional. Total company adjusted operating margin expanded 180 basis points to a record 21.3%, driven by strong core margins in both segments impacted by favorable pricing, strong productivity and disciplined cost management. These results demonstrate our ability to convert growth into meaningful earnings expansion while continuing to invest in the long-term opportunities across the portfolio. The performance of our acquisitions has been outstanding. Integration activities continue to progress ahead of plan. Operational performance has exceeded our expectations and we are realizing synergies faster than anticipated while also identifying new opportunities for growth and margin improvement. With six months now behind us, I am incredibly pleased with all aspects of the four acquired businesses. All our associates at Panametrics, Druck, Reuter-Stokes and optek together with our dedicated integration teams, are leveraging these businesses' incredible technology combined with the process and disciplined cadence of the Crane Business System, to achieve results well ahead of plan today. My thanks to the team for driving it every day. It is clear that our vision for these businesses becoming some of our best and most profitable businesses in Crane is materializing well ahead of schedule. As a result, we now expect our recent acquisitions to contribute approximately $0.20 per share to full-year earnings, up from our prior expectation of approximately $0.15 per share. Another clear example of our ability to leverage the Crane Business System and our culture and talent to drive tremendous shareholder value through accelerated inorganic growth. This is incredibly exciting for Crane. Given our strong first half performance, record backlog levels, and continued confidence in both our core and acquired businesses, we are raising our full-year adjusted EPS outlook by $0.20 at the midpoint to a range of $6.85 to $7.05 per share. Our updated guidance reflects expectations for core growth near the high end of our long-term framework, continued strong operational execution and increasing contributions from our recent acquisitions as we build on the momentum established during the first half of the year. Turning to Aerospace and Advanced Technologies. We just returned from the Farnborough Air Show in the UK. Our outstanding AAT team, including our newest associates from Druck, had another very successful show, meeting with key customers and suppliers, and solidifying alignment on a number of key growth initiatives. From a market perspective, things could not be stronger with combined broad-based demand across both our commercial and military customer base. Our teams continue to gain share among new and exciting customers. For example, in the quarter, we were selected to supply crucial components for the GE RISE program. And just last week, we announced that we will be supplying an innovative brake control system for the Otto Aerospace Phantom 3500 business jet, a solution that leverages Crane's highly modular and adaptable standard system architecture, which enables rapid and low-risk development. Clear examples of our capabilities and our ability to win share on new and growing applications. Our Defense Power business, which many of you visited during our investor meeting in Fort Worth last year, continues to build momentum. We are seeing accelerating demand in our power solutions for AESA radar platforms while also expanding our position in emerging vehicle electrification programs. In addition to the XM30 demonstrator win that we previously discussed, we secured additional power content on another hybrid electric combat ground vehicle program during the quarter. Overall, we continue to see strength across the aerospace and defense demand environment. The backlog we have 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 now expect full-year core sales growth for the segment to land just above the high end of our long-term 7% to 9% range. Very confident for yet another outstanding year at Aerospace and Advanced Technologies. Process Flow Technologies delivered another strong quarter, and we remain confident in our ability to consistently outperform the markets we serve over the long term. Over the past several years, we have strategically shifted the portfolio toward attractive end markets that align well with our differentiated technologies, strong customer relationships, and leading competitive positions, providing a solid foundation for sustained growth and market share gains. Overall demand for the quarter was in line with our expectations and execution was strong, driving an 80-basis-point improvement in adjusted margins, even with the dilutive impact of the acquisitions. Momentum in Cryogenics remains strong driven by capacity needs within the space launch segment. We secured projects for both SpaceX and Blue Origin in the quarter. We continue to win in this market based on our differentiated engineering support and manufacturing services. In nuclear, we continue to support restarts of existing facilities such as Constellation Energy's Clinton Clean Energy Center and we remain well positioned for future growth given our positioning for Westinghouse AP1000 builds in our core business and for Reuter-Stokes given their strong positioning in the nuclear space. For the full year, we expect core growth to be consistent with our initial guidance of flat to up to low-single-digits, leveraging within our targeted range of 30% to 35% and driving margin expansion despite market headwinds. In summary, we delivered a very strong first half and continue to build momentum across the portfolio. Our businesses are performing well. Our end markets remain attractive. We are exceptionally well positioned to continue generating strong results and drive further long-term shareholder value. That strong position also provides us with significant strategic flexibility. As we look ahead, acquisitions remain an important lever to further enhance our growth and earnings profile. We remain active evaluating opportunities and are encouraged by both the quality and breadth of activity across our pipeline. While timing and competitive dynamics are always difficult to predict, we believe we are well positioned to deploy capital in a disciplined and value-creative manner. Our focus on M&A remains consistent: adding highly engineered mission-critical technologies that strengthen our existing franchises, increase our exposure to attractive end markets, and support long-term margin expansion. We continue to see strong opportunities across both Aerospace and Advanced Technologies and Process Flow Technologies. Now let me turn the call over to our CFO, Mr. Richard Maue, for more specifics on the quarter.
Thank you, Alex. Another outstanding quarter for Crane. Let me start off with total company results. Total sales were up 26% in the quarter compared to last year with 5% core growth driven primarily by the ongoing strength within the Aerospace and Advanced Technologies segment. Sales from our four acquisitions contributed 20% of the growth in the quarter, which was above expectations. Adjusted operating profit increased 37%, reflecting the impact of the higher core sales contribution from the acquisitions, productivity and favorable pricing net of inflation. Another outstanding result. Total core FX-neutral backlog was up 7% compared to the second quarter of last year and up 5% sequentially, primarily reflecting continued strength at Aerospace and Advanced Technologies, though backlog was up sequentially again at Process Flow Technologies. Core orders increased 2% year-over-year with Aerospace and Advanced Technologies up 5% and Process Flow Technologies approximately flat. Orders and backlog across the acquisitions were also solid and continuing to support a stronger full-year outlook. We repaid $100 million of debt in the quarter and another $90 million subsequent to the quarter resulting in pro forma net leverage today at about 1.2 times. A very strong balance sheet that positions us well for further M&A. Before discussing segment performance, I wanted to highlight that our adjusted results—both adjusted EPS and adjusted margins—exclude a benefit from tariff recoveries recorded during the quarter. We believe it is important to isolate these one-time recoveries from the true underlying operating trends in the business and we do not expect any material incremental amounts for the balance of the year. A few more details on the segments in the quarter. Starting with Aerospace and Advanced Technologies, sales of $339 million increased 30% in the quarter with core sales up 13.3%. Our record backlog of nearly $1.3 billion increased 11% on a core basis and increased 20% including Druck. On a sequential basis, core backlog increased 7%. Once again, as reinforced at the Farnborough Air Show last week, demand remains very strong across our highly diverse portfolio. In addition to the wins that Alex just talked about, we continue to respond to increasing RFPs and RFQs across several defense programs supporting missile defense, and foreign military orders for the F-16 brake control upgrade program continue to grow. Continued momentum gives us high confidence in our multi-year outlook. On the OE side, sales remained strong with both commercial and military up double-digits driven by the ramp at commercial customers as well as ongoing strength within the defense market. Total aftermarket was up 8% in the quarter with growth similar across both commercial and military customers. Taken altogether, we remain very confident in our full-year segment sales outlook and expect full-year core sales growth slightly ahead of our 7% to 9% algorithm. Adjusted segment margin was excellent and above expectations at 25.8% compared to 26.6% last year, down slightly reflecting the expected dilutive impact from the Druck acquisition. This was an outstanding result given Druck's outperformance in the quarter as well as continued strong performance in our core A&E business. Moving to Process Flow Technologies. In Q2, we delivered sales of $386 million, up 21% compared to a year ago, with core sales down 1.4% and the acquisitions of Panametrics, Reuter-Stokes and optek adding nearly 22 points of growth and foreign exchange contributing 0.8 points of growth in the quarter. Compared to the prior year, core FX-neutral backlog at PFT decreased 2%, but on a sequential basis improved 2% and core FX-neutral orders were approximately flat, consistent with our expectations. Adjusted operating margin of 22.2% was approximately 80 basis points above last year and this was inclusive of the dilutive impact from the recent acquisitions. Like Aerospace and Advanced Technologies, results were above our expectations given better performance across both our core businesses and each acquired business. Productivity continues to read through as well as price, net cost. In summary, an excellent quarter. Moving to the non-operational items below the segments. Corporate expense for the quarter was $19 million as expected, and for 2026, we continue to forecast corporate expense to be in a range of $80 million to $85 million. Net non-operating expense in the quarter was $17 million and we continue to estimate full-year 2026 net non-operating expense of approximately $58 million. And lastly, we continue to estimate our tax rate for 2026 to be approximately 23%. Taking all of this into account, our performance to date as well as risks and opportunities we see ahead, and as Alex mentioned, we are raising our adjusted full-year guidance by $0.20 to a range of $6.85 to $7.05. Looking at the cadence for the second half, we expect Q3 to be similar to Q2 with Q4 modestly lower reflecting normal historical seasonality. Overall, an outstanding first half and momentum continues to build. Operator, we are now ready to take our first question.
Questions and answers
The floor is now open for questions. Thank you. Our first question is coming from Amit Mehrotra. Please go ahead. Your line is now open.
Thanks. Good morning, gentlemen. Appreciate the question. I wanted to start on Process Flow. Any notable observations in growth trends as you progressed through the quarter? I understand organic growth was negative and organic orders were a little bit negative. Any thoughts on any evolution on that rate as you progressed through the quarter? And any expectations around organic growth or core growth for the back half of the year as well? Thank you.
We are feeling very positive about PFT in the second half. When we went into the year, we expected the first half to be the softest, and we are pleased to see two quarters of sequential backlog improvement and sales improvement. As we progressed through the quarter, we saw orders strengthening. Demand trends are very positive and position us well for a strong second half. Quote activity started to increase and we saw many areas of strength, including in chemical production, which represents a new green shoot where customers are reporting volume growth, in particular in the Americas. All signs are quite positive in the second half. I expect PFT to turn positive year-over-year growth in the second half and I am very confident about that. In addition to chemical in the Americas starting to show positive signs, we continue to see industrial demand be very strong, building backlog in our businesses that serve industrial power, power generation in the United States, natural gas combined cycle plants. We continue to build backlog in water, wastewater and cryogenics. All those trends make me very positive about PFT in the second half.
Great. That is helpful. As a quick follow-up, I noticed the stronger comments on the M&A pipeline. There does seem to have been a recent uptick in activity across diversified industrial. Can you give a little more color on whether there have been shifts toward getting closer to deal close on transactions? Are you still seeing opportunities similar to Panametrics, Reuter-Stokes and optek where you get both accretion on the technology stack and meaningful opportunity for margin expansion? If you could talk about that, we appreciate it.
As a general guideline, our focus on any deal that we make—and what investors should expect—is that any deal we make is because we think it is accretive to the growth profile, will become accretive to the margin, will strengthen our portfolio from a technology standpoint, and will meet our financial hurdles. That is the base expectation of any deal you will see from us. We are seeing our funnel get stronger with deals that have those characteristics in both AAT and PFT. In fact, the funnels have never been stronger. Activity is solid. Timing is unpredictable, but we have the debt capacity, the management capacity, and we are well aligned to execute on capital deployment and continue that momentum. Nothing imminent to announce right now, but we feel optimistic about the pipeline.
Okay. Wonderful. Thank you for taking the questions. Appreciate it.
We will take our next question from Matt Summerville with D.A. Davidson. Please go ahead. Your line is now open.
Thanks. Two questions, both on AAT. Can you help us think about how best to frame the opportunity you could see ahead with increased missile rearmament and incremental militarization around THAAD, Patriot, Tomahawk, etc.? Discuss your exposures and how you think about that opportunity as part of your go-forward organic potential. I have a follow-up after that.
On missile demand, we see about $35 million of content today. We are on over 10 programs, including those you mentioned. Demand is increasing substantially and we are seeing RFQ activity and customer forecasts that suggest expansion of four to five times by the end of the decade. We are in a good position. Much of this is in our electronic power and microwave content, and we do not have capacity constraints to supply that demand. There is significant upside in this area.
To add, because of the capacity we have, we are receiving incremental quotes for potential content wins from other programs, not just growth from existing platforms. That is an additional opportunity beyond market growth for us.
Understood. Maybe you could speak to how you are presently thinking about the durability of the commercial aftermarket cycle and overall demand therein. It seemed you might have expected some geopolitically induced demand disruption, but that does not appear to have materialized. How would you recalibrate your view of that business today?
Overall demand is solid and remains solid. Think of our commercial aftermarket as roughly $55 million to $60 million in revenue per quarter; that is a consistent level of demand through the balance of this year. Our current view is that commercial aftermarket growth will remain in the mid-single to upper-mid-single-digit range, and that is incorporated in our updated guidance.
Thank you. We will take our next question, Scott Deuschle with Deutsche Bank. Please go ahead. Your line is now open.
Hi. Good morning. Richard, can you update us more broadly on how you are thinking about growth by end market within AAT for the year?
We are seeing good momentum across all areas. Our portfolio is broad—commercial OE, commercial aftermarket, military OE, military aftermarket—and the improvement is widespread rather than concentrated in one category. Build rates from commercial OEs are consistent with what we expected but performing slightly better. Aftermarket demand continues to be pretty solid across both commercial and military.
And does the second half guide for PFT include both volume growth as well as price? Or is it just price-driven?
We expect to see both volume growth and price contributing in the third and fourth quarters and for the full second half.
If both are positive, should we expect mid-single-digit PFT organic growth in the second half?
For the full year, we are still guiding to flat to low-single-digits. That implies a year-over-year improvement in the second half with positive growth year-over-year in the second half.
Is 3% to 5% long-term core growth for PFT still the right framework? If so, what needs to change in the operating environment to get back there or are you already seeing the change?
Yes, the 3% to 5% long-term framework remains appropriate. Historically, during cycles before we repositioned the portfolio, we saw more severe declines. The portfolio changes we have made reduce the depth of those downturns. We outperformed last year during a trough and are closer to flat this year. The portfolio is significantly different and more resilient, so 3% to 5% is a solid number to keep in mind. It will strengthen as we do acquisitions and invest organically in higher growth markets.
Thank you. We will take our next question from Nathan Jones with Stifel. Please go ahead. Your line is open.
Good morning, everyone. First, a quick lighter note: the question is not what are we going to do, the question is what are we not going to do—I'm trying to get myself a Crane coffee mug. On to the real question. You talked about flat to low-single-digit growth in PFT for the full year, which implies low-single-digit growth in the second half, and you still highlighted 35% incremental margins. You had a step-up in margins in the second half last year around 23% for the second half of last year in PFT. Should we expect low-single-digit leverage from that level, which would imply roughly a 100-basis-point step-up in PFT margins in the second half versus the first half? Or am I thinking about it incorrectly?
We expect continued strong operating leverage in the second half. We had an outstanding performance in the first half across PFT. With volumes coming through in the second half, I would expect us to leverage north of our stated leverage rate for the segment. It will be a very strong performance in the second half.
My follow-up is on the acquisitions—Panametrics, Reuter-Stokes and optek. When you bought these businesses, the expectation might have been about a five-year timeframe to get to a 10% ROI. With what you've learned so far about these businesses, can you get to 10% ROI faster than five years? Should we think about higher ROI in five years?
We expect to reach our targets faster than originally planned. We had modeled growth and margin improvements over several years, and we are ahead of schedule by perhaps one and a half years. We are seeing upside on the growth side we did not bake into the original model and seeing faster productivity and cost-out. When we went into the year, we thought growth would be 4% to 6% and margins would improve 200 basis points, then we revised that to 300 basis points. Now we expect growth to be above the 4% to 6% range and margin improvement to be more than 300 basis points, perhaps 350 basis points or higher this year. That gives a sense of the pace of improvement and we have momentum going into next year to continue driving improvement actions.
Thank you. We will take our next question from Damian Karas with BMO Capital Markets. Please go ahead. Your line is open.
Thank you for taking my question. Building off the last discussion, could you talk about some of the potential commercial opportunities or growth areas that are exciting with those acquisitions?
We have refreshed strategic plans and are deploying strategy quickly. There are a number of new self-funded product initiatives that will be launched starting next year that we think will accelerate growth. We have identified regional commercial opportunities to drive share in the different acquired businesses. On the Druck Aerospace side, there are many synergies with our AAT business on growth and new programs. We are already seeing opportunities to gain share there. These elements will become upside to our original expectations.
You highlighted share gains and some recent wins in AAT. What is enabling that business to win share? What are you doing on the commercial front that allows that to happen?
One major factor is continued investment in engineering through cycles. We continued to invest through COVID and demand slowdowns, and that investment gives us an advantage in speed and scalable modular solutions that allow us to move quickly on demonstrators at a reasonable cost. We are on every demonstrator for the U.S. Air Force, are gaining share on private jets, vehicle electrification and radar programs. Continued investment through cycles has put us in a strong position to win.
Thank you. We will take our next question from Myles Walton with Wolfe Research. Please go ahead. Your line is open.
Richard, can you size the dilution in the two segments from the deals since January, from a margin perspective?
Speaking to the quarter, in Aerospace and Advanced Technologies, the dilutive impact was close to 100 basis points. For PFT, the disclosed dilutive impact in the quarter was around 80 basis points; excluding the acquisitions, the difference would be closer to 160 basis points. The underlying businesses performed exceptionally well and the acquisitions themselves are performing better than expected.
Within PFT, relative to what you did in Q2, given momentum with the deals, where did the implied expansion come from—price, cost, mix, or volume?
It was a combination. Continued strong productivity and price, net of costs, were primary drivers. As we moved through the quarter, orders strengthened and we also did a little better on top-line, so there was some leverage on volume as well.
We acted quickly to address inflation headwinds from recent conflicts and other supply chain cost pressures. The teams were able to get ahead of that, and we are pleased to drive margin expansion even with increased inflation in freight and other areas. This reflects very strong execution from the teams.
The extra contribution you mentioned from the deals—was it mostly from Druck and the aerospace side or mostly from PFT?
All three acquired businesses in PFT are outperforming and contributing. All three are performing well.
Thank you. We will take our next question from Justin Bergner with CJS Securities. Please go ahead. Your line is open.
Hi, good morning. You gave more color on nuclear—have you seen any activity related to expanding capabilities now that Reuter-Stokes is under Crane ownership? Are you looking into alternate revenue streams there now that they are operating independently from the previous owner?
For Reuter-Stokes, we are seeing strong demand today from restarts and license expansions. We are investing for the future in technologies to expand capabilities into pressurized water reactors; historically they had a very strong position in boiling water reactors, and there is opportunity to expand beyond that. Reuter-Stokes was already investing pre-acquisition in SMRs and has a strong position with one of the key leaders. There are new product development initiatives and strategies to expand that will play out over time, and we are also seeing strength in their current demand.
We are also looking beyond legacy relationships. Historically there were strong ties to certain customers; we are expanding our footprint of opportunities to other customers and markets. Aeroderivatives is an example of an end market where we see opportunities beyond legacy relationships and a pretty nice growth market.
That is helpful. Can you refresh capital allocation priorities? You paid down debt and did more after the quarter—what is your target leverage range now?
Our target leverage range is between 2x and 3x. Currently we are below that. Our priority is M&A first and foremost. We will also pay down debt as appropriate and invest in capacity. We will buy back shares when it is the right time, but right now the focus is on M&A.
Thank you. We will take our next question from Jeffrey Sprague with Vertical Research. Please go ahead. Your line is open.
Good morning, everyone. Coming back to PFT, if chemical finally begins to turn, how should we think about the margin ramifications—will it be inherent mix or operating leverage?
On chemical, we have been cautious, but we are starting to see improvement, particularly in the Americas where chemical companies are reporting increased volumes. Our orders are starting to show that improvement as well. Margins in chemical are above average for PFT, so it will be accretive and you will see improved leverage—with our 30% to 35% incremental margin range reading stronger as the market recovers.
On guidance, did you formally change the commercial aftermarket assumptions? Last quarter you proactively trimmed guidance due to geopolitical risk. Is that now reversed and formally back in the guide that you are looking at mid-single-digit growth?
Think of commercial aftermarket in the $55 million to $60 million quarterly range. As we move through the balance of the year and into next year, we feel comfortable with a mid-single-digit to upper-mid-single-digit growth profile for commercial aftermarket, which is included in our guidance.
On OE build, you are managing any margin pressure well across the business. Does that change as volumes move up—could that help margins looking forward?
Crane earns good margins on OE, both military and commercial. The arbitrage between OE and aftermarket is not as significant for us as for others, which is a benefit. Whether OE or aftermarket is up, our diversified portfolio allows us to perform well and we expect to be in or better than our 7% to 9% growth and 35% to 40% leverage framework. You can see the margins reading through and we had a record performance in the segment this quarter.
Thank you. We will take our next question, a follow-up from Scott Deuschle with Deutsche Bank. Please go ahead. Your line is open.
Is the recovery in the U.S. chemical market connected to the closure of the Strait of Hormuz, or is it reflecting a fundamental improvement in the market?
I would characterize it as demand-based. While investments in the Gulf can persist because of feedstock advantages, in this case we are seeing a real volume demand increase, particularly from resilient U.S. consumers. I would call it independent of the Strait of Hormuz situation.
This concludes the Q&A portion of today's call. I would now like to turn the floor over to Alex Alcala for closing remarks.
Thank you for joining us today and for your thoughtful questions. As you heard throughout the call, Crane delivered an outstanding second quarter marked by strong core growth, broad-based operational execution, record margins, and another quarter of record earnings. These results demonstrate the strength of our portfolio, the resilience of our business model, and the disciplined execution of our global teams. We remain focused on what has consistently differentiated Crane: innovation, customer focus, and the relentless application of the Crane Business System to drive growth, productivity and value creation. I would like to thank our employees around the world for their commitment and outstanding execution, and thank our shareholders for their continued confidence and support. We are excited about the opportunities ahead and remain well positioned to deliver long-term value for our stakeholders. We appreciate your interest in Crane and look forward to updating you on our continued progress next quarter. Thank you, and have a great day.
Thank you. This concludes today's Crane Company Second Quarter 2026 Earnings Conference Call. Please disconnect your line at this time and have a wonderful day.