AP News

Ahead of the Bell: Crane


NEW YORK (AP) — Citi raised its rating for Crane Co. Monday, saying the company's share price provides a good entry point for investors and that the diversified manufacturer could to do better than expected in the second half of this year and in 2013.

Citi analyst Matthew McConnell also boosted his price target by $6 to $47 and noted that Crane's shares remained toward the low end of their historical range since the company announced lower-than-expected first quarter results in April.

McConnell attributed the company's low stock price to cost concerns stemming from the restructuring of its German fluid handling business. The company incurred $15 million in second-quarter restructuring charges, including $11 million related to fluids as it moved production from Germany and the United Kingdom to lower-cost countries.

But McConnell said that the risks related to the fluids business are under control after the restructurings in the first half of the year, with the company only expected to incur about another $4 million in restructuring costs this year.

"These costs have been well-forecast and are included in our expectations, which still assume Crane can generate a 14 percent operating margin in fluid handling in second half 2012," McConnell wrote in a note to investors. "From here, we consider the restructurings to be more surgical and should speed the migration of production to low-cost locations, driving $10 million of annual savings for fluid starting in 2013."

McConnell raised his rating to "Buy" from "Neutral,"

Meanwhile, the company is well positioned at this point in the product cycle with a near sector high 75 percent of its product sales coming from mid- and late-cycle markets, he said.


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