CXT: Currency Momentum And Antares Acquisition Will Drive Authentication Expansion

Key Takeaways

• Advanced anti-counterfeiting and digital security solutions, along with acquisitions, strengthen authentication capabilities and drive operating synergies for margin improvement.
  
• Increased recurring revenue and expansion into adjacent segments diversify the portfolio, supporting long-term margin growth and reducing earnings volatility.
  
• Crane NXT faces major risks from shifting to digital payments and software, heavy reliance on acquisitions, customer concentration, and intensifying industry competition.

Catalysts

Operates as an industrial technology company that provides technology solutions to secure, detect, and authenticate customers’ important assets.

• Expansion and integration of Crane Authentication, driven by advanced anti-counterfeiting solutions (e.g., Fortress) and increased demand from global brands and governments, positions the company to capitalize on rising product authentication and cybersecurity needs-likely translating into sustainable top-line growth and higher operating margins through operating synergies.
  
• High and growing international currency backlog, driven by recurring business from existing central bank customers and expectations for new wins in micro-optics, indicates resilient demand and revenue visibility as governments worldwide prioritize secure currency and anti-money laundering infrastructure.
  
• Acceleration in realization of operating synergies from recent acquisitions (De La Rue and OpSec), including cost structure simplification, site consolidation, and product rationalization, is expected to increase Authentication segment margins to ~20% by the end of 2026, supporting significant earnings growth.
  
• Launch of new high-margin, technology-driven products (e.g., JetScan Ultra, digital authentication features) places Crane NXT at the forefront of next-generation secure payment and authentication solutions, supporting future organic revenue growth and improved profitability as the market transitions toward advanced digital security.
  
• Strategic focus on disciplined M&A, expansion into adjacent segments (e.g., ID verification, digital authentication), and increased recurring service/software revenues diversifies Crane NXT's portfolio, positioning the company for long-term margin expansion and reduced volatility in earnings.

Crane NXT Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Crane NXT's revenue will grow by 8.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.8% today to 18.9% in 3 years time.
• Analysts expect earnings to reach $367.2 million (and earnings per share of $5.45) by about September 2028, up from $151.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.1x on those 2028 earnings, down from 23.0x today. This future PE is lower than the current PE for the US Electronic industry at 23.9x.
• Analysts expect the number of shares outstanding to grow by 0.42% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.06%, as per the Simply Wall St company report.

Crane NXT Future Earnings Per Share Growth

Risks

• Crane NXT remains significantly exposed to currency-related technologies and physical authentication solutions, and while international currency backlogs are strong, the accelerating global shift to digital and cashless payments could erode long-term demand in these legacy hardware-driven markets, threatening future revenue growth and addressable market size.
  
• The company's recent growth in Authentication heavily relies on acquisitions and the rapid integration of new businesses (like De La Rue and OpSec), presenting ongoing execution risk; failure to effectively transition from legacy hardware to scalable digital and software-based solutions could lead to competitive share loss and compressed net margins.
  
• Margin guidance reflects material dilution from recent acquisitions and ongoing unfavorable product mix (e.g., lower-margin vending products), indicating persistent industry pressure from commoditization and pricing competition that could drag on long-term earnings quality and profitability.
  
• Customer concentration remains a structural risk, particularly in government and central bank contracts; if these customers accelerate moves away from cash-based or physical authentication infrastructure in favor of pure digital alternatives, Crane NXT could experience revenue volatility and heightened earnings uncertainty.
  
• M&A is a key part of Crane NXT's growth strategy, and although the funnel is strong, increased competition from fintech startups and innovative software-driven disruptors could either inflate acquisition costs or render acquired hardware-centric assets less valuable over time, impacting both future revenue streams and returns on invested capital.

Valuation

• The analysts have a consensus price target of $73.667 for Crane NXT based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $88.0, and the most bearish reporting a price target of just $57.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.9 billion, earnings will come to $367.2 million, and it would be trading on a PE ratio of 15.1x, assuming you use a discount rate of 9.1%.
• Given the current share price of $60.72, the analyst price target of $73.67 is 17.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.