Why Boeing Can't Switch Away From This 1855 Brass Foundry

Today, I'm looking at Crane Company (CR). They aren't exactly a household name, but they make the stuff that absolutely cannot fail. Think aircraft brakes, rocket valves, nuclear plant components.

Here's what caught my attention:

• Founded in 1855 making brass fittings in Chicago, now they're in SpaceX rockets

• Their moat is real but regulatory hell for customers (switching suppliers means years of certifications)

• 33% of aerospace revenue is aftermarket (sell the plane brake once, replace it for 30 years)

• Just split from their payment tech division in 2023 to focus on industrial

Key lessons for entrepreneurs:

• Switching costs are powerful - they score 5/5 on switching costs

• Boring is profitable - no flashy marketing, just technical specs to engineers who buy millions

• Aftermarket is everything - design products that need expensive replacements

But not everything is gumdrops and lollipops....

• Zero AI strategy in 2025 (that I could find anyway)

• ROIC below cost of capital - they're technically destroying value

• Gross margins dropped from 46% to 38% (attributed to a divestiture, margin dilutive acquisitions, and unfavorable product mix)

I can't imagine myself working on a business with this much regulatory requirements but that's what can drive margins and customer retention.

With that, I'll talk to you tomorrow.

Nick

The 30,000-Foot View

Crane is a diversified industrial manufacturer operating through two main segments that generate serious cash:

What They Actually Do

The company designs and manufactures highly engineered components for situations where failure isn't an option. Think brake controls for Boeing jets, valves for chemical processing plants, and specialized pumps for space applications.

Revenue Breakdown (2024):

• Process Flow Technologies (56%): $1.2 billion segment making valves, pumps, lined pipes, and instrumentation for chemical, pharmaceutical, and water treatment industries

• Aerospace & Electronics (44%): $933 million segment producing critical systems for commercial aerospace, military, defense, and space markets

Key Stats:

• Market Cap: $11.17B

• TTM Revenue: $2.12B

• Gross Margin: 56.7%

• Net Income Margin: 12.6%

• EBITDA: $376M

• Employees: ~7,500

• Industry: Diversified Industrial Manufacturing

• Aftermarket revenue: ~33% of aerospace segment

Company History

• 1855: Richard Teller Crane founds R.T. Crane Brass & Bell Foundry in Chicago on July 4th, making brass goods and plumbing supplies

• 1872: After Great Chicago Fire, rebuilds as Crane Bros. Manufacturing with 700+ employees

• 1951: Pivotal acquisition of Hydro-Aire launches aerospace business—company invents anti-skid brake control technology

• 1969: Crane pumps literally go to the moon on Apollo missions

• 1985: Acquires UniDynamics, creating foundation for future growth platforms

• 2001-2014: Eric Fast era transforms company from industrial conglomerate to focused operating company

• 2013: Completes largest acquisition ever—MEI Conlux Holdings for $820M, creating Payment Solutions division

• April 2023: Historic separation—splits into Crane Company (CR) and Crane NXT (CXT), focusing on core industrial businesses

• January 2025: Divests Engineered Materials for $227M, doubles down on aerospace and process flow

• June 2025: Announces $1.06B acquisition of Precision Sensors & Instrumentation from Baker Hughes (pending)

Show Me the Money

*2022 figures are pro forma estimates representing Crane Company as a standalone entity

• Adjusted free cash flow hit $234M (vs $165M in 2023)

• Strong order backlog: A&E backlog $864M (up from $701M), PFT backlog $376M

• ROIC below cost of capital: 7.1% vs WACC 8.6%

• Aftermarket generates 33% of aerospace revenue at higher margins and provides for revenue stability

Financial Data

The N.O.O.B. Nine — Competitive Powers

The Nerd Out on Business Nine is made up of Hamliton Helmer's famous "7 Powers" of competitive advantage (Scale Economies, Network Economies, Counter-Positioning, Switching Costs, Branding, Cornered Resource, and Process Power) combined with two of my own (Data Flywheel and Distribution Advantage).

Average Score: 3.3/5 - Solid moat built on switching costs and distribution

Memorable Marketing

Crane's B2B marketing strategy prioritizes technical authority over flash. Their approach reflects the reality of selling to engineers and procurement departments who value specifications over sizzle. Core messaging relentlessly hammers their "mission-critical" positioning.

Key Campaigns:

"The Crane Advantage" (2022-Present)

• Core idea: Technical superiority through heritage brands

• Primary channels: Trade shows, LinkedIn, industry publications

• Why it worked: Engineers trust boring—flashy kills credibility in mission-critical applications

• Results: Successfully unified messaging across nine acquired brands without losing individual brand equity

LinkedIn Technical Content Domination (2023-2025)

• Core idea: Flood LinkedIn with technical achievements, product specifications, and engineering case studies

• Channels: LinkedIn posts, employee advocacy programs

• Why it worked: Target audience of aerospace engineers and industrial buyers lives on LinkedIn

• Results: 15K+ followers with consistent engagement from key decision-makers

New Space Positioning (2024-Present)

• Core idea: "Powering Your Mission" campaign targets electric aviation and deep space applications

• Channels: Satellite conferences, aerospace trade publications, direct OEM engagement

• Why it worked: Positioned 170-year-old company at cutting edge of new space race

• Results: Selected for major commercial space launch programs

Tactical Takeaways for Entrepreneurs:

• Heritage sells in B2B—Document and leverage your founding story relentlessly

• Technical content beats marketing fluff—Show expertise through detailed case studies and specs

• Own 2 trade shows vs attending 10 halfheartedly—Depth beats breadth in B2B presence

• Keep acquired brand names—Why destroy brand equity you paid millions to acquire?

• Position as mission-critical, not nice-to-have—Make your product sound essential to operations

AI Uses & Opportunities

Current State: Surprisingly limited for a $11B company—no disclosed AI initiatives, predictive analytics, or smart product features. I’m sure they are doing plenty with AI internally but they aren’t talking about, which isn’t necessarily a bad thing. Here’s what I would do:

Cost-Cutting Opportunities:

• Predictive Maintenance: Know when aerospace parts will fail before customers do—capture aftermarket revenue proactively

• AI Quality Control: Automated inspection for military spec compliance (avoid another $4.5M False Claims settlement)

• Dynamic Pricing: Algorithm-based pricing for 33% aftermarket business based on urgency, inventory, and customer history

• Supply Chain Optimization: AI demand sensing to optimize $1.24B backlog and reduce working capital

Product Enhancement Ideas:

• Smart Valves: IoT sensors with failure prediction algorithms—charge premium for "never fail" guarantee

• AI-Integrated Brake Systems: Next-gen fighter jets need adaptive braking based on conditions

• Digital Twin Services: Virtual replicas of customer installations for optimization and troubleshooting

• Real-Time Monitoring: Performance analytics for nuclear valve applications—compliance as a service

New Revenue Streams:

• Performance Analytics Subscriptions: $50K/year monitoring packages for industrial customers

• Predictive Failure Services: Alert customers 90 days before critical part failure

• Digital Simulation Services: Complex fluid dynamics modeling for custom applications

• AI Compliance Monitoring: Automated regulatory compliance tracking for defense contractors

Bumps in the Road

Legal/Regulatory Challenges:

• $4.5M False Claims Act settlement (2021): Used unauthorized parts in Navy valve assemblies—highlights quality control risks in defense contracting

• Environmental liabilities: Ongoing remediation at Goodyear site since 1994, though smartly offloaded asbestos liabilities in 2022

• Regulatory complexity: Operating in nuclear, defense, and aerospace means constant compliance burden

Financial & Operational Headwinds:

• Q4 2024 earnings miss: Delivered $1.26 vs $1.29 expected EPS, though stock paradoxically rose 8.74%

• Hurricane Helene impact: Marion facility damage caused $0.09 EPS hit in Q4 2024

• ROIC below cost of capital: At 7.1% vs WACC of 8.6%, they're technically destroying shareholder value

• Boeing ripple effects: Aerospace supply chain still recovering from 737 MAX disasters and production slowdowns

Competitive & Market Pressures:

• Valve market commoditization: Everyone makes valves now—margin pressure increasing despite 5% annual market growth

• Aggressive competitors: Emerson Electric and Parker Hannifin targeting their industrial segments

• Geographic weakness: Europe and China markets stagnating while management remains overly optimistic

• Digital transformation lag: No clear AI strategy while competitors digitize—risk of disruption from software-enabled competitors

Your Swipe File

• Seek switching costs (without being a jerk to your customers): Aerospace certifications create 5+ year switching cycles

• Aftermarket is a powerful real business: Sell razors to sell blades for 30 years

• Buy competition's tech, keep their customers: Don't rebrand acquisitions immediately

• Mission-critical beats nice-to-have: Parts that prevent catastrophe have pricing power