Crane Company (CR) 2026 Q2 法說會逐字稿

Welcome to the Crane Company's second-quarter 2026 earnings conference call. (Operator Instructions)

would now like to turn the call over to Allison Poliniak, Vice President of Investor Relations.

Thank you, Tasha, and good day, everyone. Welcome to our second-quarter 2026 earnings release conference call. I'm Allison Poliniak, Vice President of Investor Relations.

On our call this morning, we have Alex Alcala, President and Chief Executive Officer; and Rich Maue, our Executive Vice President and Chief Financial Officer; along with Jason Feldman, Senior Vice President, Treasury and Tax, who's on for Q&A. We will start off our call with a few prepared remarks from Alex and Rich, after which we will respond to your questions.

And just 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, 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 a company slide presentation, both of which are available on our website at www.claimco.com in the Investor Relations section.

Now, let me turn the call over to Alex.

Thank you, Alison, 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.

And 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'm incredibly pleased with all aspects of the four acquired businesses. All our associates at Panametrics, Truck, Lever-Stokes, and OpTech together with our dedicated integration teams are leveraging these businesses' incredible technology combined with the process and discipline cadence of the Crane business system to achieve results well ahead of plan to date.

And my thanks to the team for driving it every day. It's clear that our vision for these businesses of becoming some of our best and most profitable businesses in Ukraine 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 incredible 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 included our newest associates from SARC had another very successful show, meeting with key customers and suppliers and solidifying alignment on a number of key growth initiatives.

And from a market perspective, things could not be stronger with a 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'll be supplying an innovative brake control system for the auto aerospace Samsung 3,500 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 Long Beach last year, continues to build momentum. We are seeing accelerating demand in our power solutions for our ESA 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 aeorospace 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 now expect full year coal 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, as you know, we have strategically shifted the portfolio towards 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 points improvement in adjusted margins, again, 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 Crane Clean Energy Center, and we remain well positioned for future growth, given our positioning for Westinghouse AP1000 builds in our core business and for Roder Strokes, 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 headlines.

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, and 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 in 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. Rich 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 technology 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, contributions from the acquisitions, productivity and favorable pricing net of inflation, another outstanding result. And 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.

And core orders increased 2% year-over-year with their 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 benefits from IEEPA 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 31% in the quarter with quarter sales up 13.3%. Our record backlog of nearly $1.3 billion increased 11% on a core basis and increased 20%, including drug. On a sequential basis, core backlog increased 7%.

Once again, as reinforced at the airshow 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 for military orders, foreign military orders for the S-16 brake control upgrade program continue to grow. Again, continued momentum giving us high confidence in our multi-year outlook.

Let me spend a minute on the core business in the quarter. On the OE side, sales remained strong with both commercial and military up double-digits driven by the ramp at our 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% with the acquisitions of Panametrics, RotorStokes and OPTEC adding nearly 22 points of growth and foreign exchange contributed 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 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. And 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 the range of $80 million to $85 million. Net non-operating expense for 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 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.

And with that strong performance, for anyone considering investing in Crane or those looking to potentially invest more in Crane, I am reminding you of the wisdom imparted by the award-winning actor Matthew Broderick playing the fan favorite Ferris Bueller in the movie Ferris Bueller's Day Off. Life moves pretty fast. If you don't stop and look around once in a while, you could miss it.

And with that operator, we are now ready to take our first question.

(Operator Instructions)

Amit Mehrotra, UBS.

Maybe I just wanted to start on process flow. Any notable observations in growth trends as you sort of progress through the quarter? I understand organic growth is negative. Obviously, organic orders were a little bit negative, but maybe any thoughts on. Any evolution on that rate as you progress through the quarter? And just any expectations around organic growth or core growth for the back half of the year as well?

So we're feeling very positive about PFT in the second half. I think 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 progress through the quarter, we saw orders strengthening, and I'll speak more about it.

So the demand trends are very positive in position as well for the second half. It could have very well been a positive outcome based on the trends that we've seen from a year-over-year basis. We saw quote activity starting to increase and many areas of strength, including in the chemical production, which is a bit of a new green spout, where we're trying to see customers talk about and report volume growth in particular in the Americas.

So all signs are quite positive in the second half. I expect PFT to turn positive growth year-over-year in the second half, very confident about that with those trends. In addition, I think in addition to chemical in the Americas starting to show some positive signs, we continue to see industrial demand be very strong, building backlog in our businesses that drive industrial, power Gen.

In the United States, natural gas combined cycle plants, we continue to build backlog in that area, water, wastewater, cryogenics. So all those trends make me very positive about PFT in the second half.

Great. Got it. That's helpful. And just as a quick follow-up, I noticed kind of your more stronger comments on the M&A pipeline. It does seem across diversified industrials that there has been a recent uptick in activity. Maybe just give a little bit more color there on kind of there have been shifts in sort of getting closer to the finish line on stuff?

And are you still seeing opportunities sort of like PSI that -- I know PSI was really kind of three deals in one, so to speak, but we'll be curious to see if you're seeing deals where you can both kind of see accretion on the technology stack as well as sort of meaningful opportunity for margin expansion. So if you can just talk about that, we appreciate it.

Yeah, I mean, I think as a general guideline. Our focus on any deal that we make and what investors would expect is that any deal that we make is because we think it's accretive to the growth profile, will become accretive to the margin, will strengthen our portfolio from a technology standpoint and also will meet the financial hurdle. So that is the basic expectation of any deal you'll see us.

We are seeing our funnels get stronger with deals with those characteristics in both AAT and PFT. In fact, they've never been stronger. So activity is solid. Like I mentioned in my comments, the timing is a bit unpredictable, but we have the debt capacity, we have the management capacity. And I think we're well aligned to execute on capital deployment and continuing with that momentum. Nothing imminent to talk about right now but feel optimistic about it.

Matt Summerville, DA Davidson.

Two questions, both on AAT. Can you help me or help us think about how best to frame the opportunity you could see ahead with all of this missile rearmament and incremental militarization around FAAD, Patriot, Tomahawk, et cetera, kind of discuss your exposures and how you think about that opportunity as part of your go-forward organic potential, and then I have a follow up.

So on missile demand, we see about $35 million of content today. We're on over 10 programs, including those that you mentioned. We're seeing strong demand today increasing, but we're also seeing from our customers RFQ activity and forecast that would expand four or five times that rate going to the end of the decade.

So we are in pretty good position. A lot of our power, mod power, microwave content, and we don't have any capacity constraints to supply that demand. So pretty good upside for us in that area.

Yes, just to add to that a little bit, because of the capacity that Alex mentioned, we're actually getting incremental quotes for potential content wins from others, so not just growth from existing platforms. So another opportunity I would say beyond market for us.

Understood. And maybe if you guys could speak to how you're presently thinking about the durability of the commercial aftermarket cycle and overall demand therein. Seems like maybe you were expecting a little bit of maybe geopolitical induced demand destruction, but that doesn't seem to be coming to fruition. So how would you recalibrate how you're viewing that business today?

Yeah, Matt, I would say just overall, demand is solid, remains solid, right? If you step back and you look at our aftermarket positioning, think of us as $55 million to $60 million in revenue a quarter in commercial aftermarket. That's incremental, as we have military, but on the commercial side, that's the way to think about our consistent level of demand through the balance of this year.

We would expect commercial aftermarket to continue in mid-single to upper mid-single rate as you look further out, that's our current view. But overall, for this year, solid, consistent demand levels, and that's incorporated in our updated guidance.

Scott Deuschle, Deutsche Bank.

Rich, can you just update us more broadly on how you're thinking about growth by end market with an AAT for the year?

Yeah, sure. So I mean, look, we're seeing good momentum across all areas. As our portfolio was quite broad, commercial OE, commercial aftermarket, middle OE, middle aftermarket. As we were looking at our guide of seven to nine and us now raising that a bit, it is more widespread.

So it's not necessarily more in any of those individual categories. We're seeing it more broadly. So build rates from the commercial OEs consistent with what we thought, but performing slightly better. And then on the aftermarket on both sides, just given the overall activity continues to be pretty solid.

Okay. And then does the second-half guide for PFT contemplate volume growth as well as price or is it just price driven?

We're going to see both. We're going to show volume growth in the third quarter, fourth quarter and the full second-half as well.

So if they're both positive, should we see like mid-single-digit type PFT organic growth in the second-half?

I think for the full year, I mean you can do the math, but we're still expecting to be flat to low single-digits, so that has some implications here in the second-half, we are going to go positive on a year-over-year.

And then I guess just is 3% to 5% long-term core growth for PFT still the right framework? And if so. What needs to change in the operating environment to get back there or are you already seeing the change that you need to see to get to that 3% to 5%?

Yeah, I mean, if you go back in history, yeah, the 3% to 5% is still a good number. If you go back in history during the last cycles and downturns, right, like 2014, '15, before we repositioned the portfolio, during these cycles, we would be down 7%, 8% on the topline. We've been going through this trough, in particular in the chemical markets, you can see that we outperformed 4% or 5% last year, we're closer to 1% flat.

So we're not the portfolio has changed significantly where we're during the cycle, we don't see that hard dip. So we feel good about that 3% to 5%, it will only get stronger as we do acquisitions and continue to invest organically in our hierarchical markets. So I think that's a solid number to keep thinking about.

Nathan Jones, Stifel.

I guess my first question is for Rich. The question isn't what are we going to do? The question is what aren't we going to do? I'm trying to get myself a Crane coffee mug.

You'll get one, Nathan. (multiple speakers)

Real question. You talked about flat to low single-digit growth in TFT for the full year, which implies probably low single-digit growth in the second-half and still talked about 35% incremental margins. You did have a step up in margins second-half last year. Around 23% for the second half of last year in PST.

Should we expect that kind of low single-digit leverage coming from that level, which would imply kind of a 100 basis point step-up in PST margins in the second half versus the first half, or am I thinking about it wrong?

Yes, look, what I would say, Nathan, is we are going to see continued strong operating leverage in the second half. An outstanding performance in the first half across all of PFT. If you just do straight math, it's almost incalculable, right? But just excellent performance in driving margins notwithstanding the top-line headwinds. So then when we do see the volumes come through in the second half, I would expect us to leverage north of our stated leverage rate for the segment. So it will be a very strong performance in the second-half.

Okay, I guess my follow-up question is around the acquisitions that you've made here. You're pretty positive on the fourth quarter call, just after you'd closed it, positive on the first quarter call, positive again here on the second quarter call. I'm just thinking about this from a longer-term basis. I think when you bought the EST business -- PSI business, sorry, at least. It was kind of a five-year timeframe to get to 10% ROI.

With what you've learned so far about these businesses, is this kind of we can get to 10% ROI faster than five years, we can end up with a higher ROI in five years. How should we be thinking about that these days?

Yeah, Nathan, we're definitely going to get there faster. So if you remember, we were talking about going from like $58 million of EBITDA to close to $150 million by year five. We're ahead of schedule, maybe a year and a half on what we expected.

We're seeing just offside opportunities on the growth side, which we then bake into our model going in on the productivity cost out. It's in all aspects, the teams are doing an outstanding job. We will be there earlier than originally thought. So if you remember, when we went into the year, we thought we would grow 4% to 6%, improve 200 basis points, then we revised that to 300 basis points.

Now, I'm thinking we're going to be over on the growth side of our guide of the 4% to 6%. It's going to be above that. And it's going to be more than the 300 basis points of improvement, maybe 350 basis points or higher this year. So that gives you a sense of the pace of improvement that and we have good momentum going into next year as well to continue to drive improvement actions.

Dan DiCicco with BMO Capital Markets. Please go ahead. Your line is open.

Thank you for taking my question. So maybe building off that last question, could we talk about some of those potential commercial opportunities or growth areas that are potentially exciting with that acquisition?

Yeah, for sure. I mean, for starters, I think I mentioned in prior calls, one of the part of our playbook is to quickly refresh the strategic plan and drive strategy deployment. So there's a number of new NPDs that are self-funded that will be launched in the years ahead starting next year that we think will accelerate. I think we've identified various regional commercial opportunities where we have opportunity to drive share in the different businesses.

And then on the Druck Aerospace side, there's a lot of synergies between our A&E business and Druck. On growth of new programs, we're starting to see opportunities to gain share there as well. So all these things will become upside to original.

And then just one more. So I think you highlighted just share gains and some recent wins in AAT. So maybe if you could touch on what do you think is enabling that? For the business or what are you doing on the commercial front that's allowing that to happen?

Yeah, I think something that we've done well over the last decade and that Max was very adamant about was to continue to invest through the cycles. So we continue to invest in engineering through COVID, through the ups and downs, through the slow demand. And we have this advantage on speed, scalable, modular that allows us to move fast on these demonstrators accurately at a reasonable cost.

And we're on every demonstrator for the US Air Force. We're on the new CCA opportunities. We're gaining share on the private jets. And vehicle electrification, radar. And I think that's been the major key, just that continued investment through the cycles that have put us in this good position to win.

Myles Walton, Wolfe Research.

Rish, can you size the dilution in the two segments from deals since January?

From a margin perspective overall you're referring to or? Yeah, so if you I'll speak to the quarter just to give you a sense, right? We would be probably close to 100 basis points or we were in Q2 close to 100 basis points better in aerospace and advanced technologies.

And if you looked at PFT, we'd be closer to I think we disclosed on the call 80 basis points with the dilutive impact, it would be closer to 160 excluding. So the degree of performance on the underlying business is exceptional is what I would say. But I would also say that we expected further dilution coming from the deals, they are performing better.

So each of the acquisitions are performing better and our core underlying business is performing better.In the first quarter, i I think the numbers are similar. I don't have them in front of me, but I would say that they're similar in the first quarter. And then within TFG, a little bit behind what we did in Q2 just given momentum with the deals.

And then within PFT, the implied expansion from a bucket of price, cost and mix, where should we think the most amount of that came from?

In terms of alcohol? (multiple speakers)

Core margin expansion year-on-year.

Yeah, I mean, just continued strong productivity cost, price net cost, just solid, I would say that that. And as Alex pointed out, as we were moving through the quarter. From an orders perspective, getting stronger, and we also did a little bit better as we were moving through the quarter from a top-line point of view, so a little bit of leverage on volume too.

Very pleased with that performance, just to add, we were smart in understanding the inflation headwinds that would come from the current conflict in the Middle East, and the teams were able to quickly get ahead of that. So I'm very pleased that we're able to drive margin expansion even with increased inflation that we're seeing in freight in other areas. So I think very strong execution from the teams.

And one last one, if I could, the extra nickel from the deals, was it mostly out of Druck and Arrow or mostly out of PST?

All three businesses are outperforming. Thank you.

Justin Ages, CJS Securities.

You gave a bit more color on nuclear and was just wondering if you've seen any activity elated to expanding the capabilities? Because one of the things you had mentioned in the past was, now that they've been unshackled from their previous owner, you were looking into alternate revenue streams there.

Yeah. So for Rodus folks, we're seeing strong demand today from the restart license expansions and so forth. We are investing for the future in technologies that will get us more into pressurized water reactors. As you may recall, we have a very strong position in boiled water reactors, and there's opportunity to go beyond that. So there's new product development and strategies to expand.

That will play out in the years ahead Florida Stokes was already investing pre-acquisition in SMRs. So they have a very strong position with one of the key leaders. So there's a lot of good stuff going on that will play out here in the future for them, but also seeing the strength of their demand today.

Just to add, and I think maybe part of your question is getting at the tie back to the Baker Hughes business and GE and the legacy. So I would say yes, as well as looking beyond those relationships that were historically solidified, we're looking at other opportunities beyond that, right? So strategically expanding our footprint of opportunities to others, that is absolutely something that we're.

We're focused on Aero derivatives is an end market, right, that I think we've been asked about, or it might have been yourself or others. That's a perfect example where there's opportunities beyond the legacy relationship and what we see is a pretty nice growth market.

And then can you just refresh us on capital allocation priorities? You paid down. You paid down debt after the quarter ended. What's your target leverage range now?

Yeah, I mean, we would target between two and three times. Clearly, we're below that now. Our priority is M&A, number one, first and foremost. So I would think about us as deploying our capital to M&A. I certainly will pay down debt as well as part of expanding our capacity, but sort of fungible when you think of it.

From that perspective. And we'll buy back shares when we think it's the right time to buy back shares. But right now, it's all about M&A.

(Operator Instructions)

Jeffrey Sprague, Vertical Research.

A lot of good ground covered here. I just wonder if just coming back to PFP, Alex or Rich, just thinking about maybe chemical finally beginning to turn after kind of a tough slog here, just some color on kind of the margin ramifications of that, whether it's just kind of inherent mix in the business or the operating leverage that might come with that.

Yeah, Jeff, so again on chemical, I've been quite cautious to talk about improvement, but now we're starting to see something, like I mentioned, in particular in the Americas, you can see some of the chemical companies reporting on increased volume, which is what we were waiting to see to start feeling better. Our orders are starting to show as well.

The margins are above average for PFT, so it will be accretive and you'll see improved leverage on PFT versus what we normally talk about the 30%, 35%, it will be stronger as these markets recover. That's what I would say.

And then maybe just on guidance and Rich, I was on maybe 10 minutes late, so perhaps you covered this. I did hear your comments about aero aftermarket growing mid-single-digit kind of going forward, but did you formally change that in your guide? You had kind of proactively or preemptively haircut the guide last quarter on geopolitical risk. Is that now kind of reversed back to formally being in your guide that we're looking for up mid-single-digit?

So, Jeff, I would say that our run rate or approximate range of commercial aftermarket is in the $55 million to $60 million range is the way to think about it as we move through the balance of the year and as we enter next year, we feel, to the point I made earlier, pretty good about a mid-single-digit to upper mid-single-digit growth profile for commercial aftermarket.

And then just on the kind of the OE build, it looks like you're managing any sort of margin friction there quite well across the business, but does that perhaps change as volumes move up even looking forward?

Yeah, so look, maybe what's different about Crane, I think you appreciate this, Jeff. We make good margins on OE, whether that's military OE, commercial OE, and that arbitrage between aftermarket and commercial isn't as significant for us as for others, which is, I think, a really good benefit for our investors, frankly.

The diversified nature of the portfolio, we're sort of agnostic as to whether or not OE is up or aftermarket is up and so forth. So when you look at our 7% to 9% guide. In our 35% to 40% leverage, we're going to be in that or better, frankly, but in that range no matter what. And so I think that's the way we think about it. So to your point, we're seeing excellent OE growth here, and we're loving that.

You can see the margins.

And you see the margins reading through.

I think we might have had a record performance in the segment this quarter.

Scott Deutschel, Deutsche Bank.

Hey, sorry for the ignorant question, but is the recovery in the U.S. Chemical market connected at all with the closure of the Strait of Hormuz or is it reflecting a fundamental improvement in the market?

I would say it's demand-based. So when we talk about our impact or investments in the Gulf, customers can invest even when there's no demand for increased chemical in the Gulf because of the advantage of these stocks. So that's one driver. But in this case, there's a volume demand increase at the USC.

I think the US consumer in particular has been resilient. And you can see some of these chemical companies starting to see that benefit. So I think I would call it independent of that.

And this concludes the Q&A portion of today's call. I would now like to turn the floor over to Alex Alpilo for closing remarks.

Thank you for joining us today and for your thoughts or questions. As you've heard throughout the call, Crane delivered an outstanding second quarter marked by strong core growth, fraud-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'd 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 so 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's second-quarter 2026 earnings conference call. Please disconnect your line at this time and have a wonderful day.