크레인 컴퍼니(CR) 2026년 3분기 실적 콘퍼런스 콜: 사상 최고 마진 기록으로 EPS 가이던스 상향

크레인 컴퍼니(Crane Company, CR)는 2026 회계연도 3분기 실적 발표에서 항공우주 및 방산 수요, 프로세스 플로우 기술(Process Flow Technologies) 부문의 수주 개선, 예상보다 호조를 보인 인수합병(M&A) 성과에 힘입어 광범위한 성장세를 기록했다고 발표했다. 경영진은 연간 조정 주당순이익(EPS) 전망치를 상향 조정하고 환율 변동을 제외한 핵심 수주 잔고가 9% 증가했다고 강조했다.

핵심 요약

• 총매출은 전년 동기 대비 28% 증가했으며, 여기에는 8%의 자체(core) 성장과 4건의 인수로 인한 21%의 기여분이 포함된다.
• 조정 영업이익은 36% 증가했으며, 인수에 따른 일시적 이익률 희석에도 불구하고 조정 영업이익률은 130베이시스포인트(bp) 확대된 22.5%로 사상 최고치를 기록했다.
• 환율 변동을 제외한 핵심 수주 잔고는 전년 동기 대비 9% 증가했다. 자체 수주는 프로세스 플로우 기술 부문의 수주가 20% 증가한 데 힘입어 11% 늘었다.
• 경영진은 2026 회계연도 연간 조정 EPS 전망치 중간값을 0.35달러 상향 조정하여 7.23달러~7.38달러로 제시했다.
• 항공우주 및 첨단 기술(Aerospace & Advanced Technologies) 매출은 27% 증가한 3억 4,400만 달러를 기록했으며, 자체 매출은 9.5% 증가하고 조정 사업부 이익률은 26.3%에 달했다.
• 프로세스 플로우 기술 매출은 29% 증가한 4억 1,300만 달러를 기록했다. 자체 매출은 6.2% 증가했으며, 조정 사업부 이익률은 사상 최고치인 24%를 기록했다.

주요 재무 데이터

회사는 근본적인 영업 추세와 분리하기 위해 일회성 관세 환급 이익을 조정 실적에서 제외했다.

사업 및 영업 성과

항공우주 및 첨단 기술

항공우주 및 첨단 기술 부문은 전년 동기 대비 27% 증가한 3억 4,400만 달러의 매출을 달성했다. 자체 매출은 9.5% 증가했다.

이 사업부의 수주 잔고는 13억 달러에 육박했으며, 자체 기준 9%, 인수 효과를 포함하면 20% 증가했다. 이러한 성장은 상업용 완제품(OE) 생산 확대와 광범위한 방산 수요에 힘입었다. 전년도 초기 부품 공급을 제외하면 전체 애프터마켓 매출은 11% 증가했으며, 핵심 상업용 애프터마켓은 한 자릿수 후반대의 성장률을 기록했다.

조정 사업부 이익률은 100bp 상승한 26.3%를 기록했다. 경영진은 완제품 매출 비중 상승과 예상된 인수 관련 이익률 희석에도 불구하고 이러한 결과를 달성했다고 밝혔다.

방산 분야의 기회는 미사일 방어, 레이더, 첨단 전력 변환 및 우주 역량에 지속적으로 집중되었다. 크레인은 약 15개의 미사일 프로그램에 참여하고 있으며, 2026년 매출 기반은 약 3,500만 달러이다. 경영진은 이 사업 활동이 2027년에 40%~50% 성장할 것으로 예상하며, 해당 수요의 상당 부분은 이미 수주 잔고에 반영되어 있다. 또한 회사는 향후 10년 동안 이 사업이 현재 수준의 4배에서 6배로 확장될 잠재력이 있다고 보고 있다.

프로세스 플로우 기술

프로세스 플로우 기술 부문은 29% 증가한 4억 1,300만 달러의 매출을 기록했다. 자체 매출은 6.2% 증가한 반면, 인수합병이 약 24%포인트의 성장에 기여했다.

환율 변동을 제외한 핵심 수주 잔고는 전년 동기 대비 8%, 전분기 대비 2% 증가했다. 수주는 전년 동기 대비 20%, 전분기 대비 8% 늘었다. 조정 사업부 이익률은 80bp 상승해 사상 최고치인 24%를 기록했다.

초저온, 전력, 수처리 및 폐수, 제약, 원자력 및 일반 산업 시장 전반에서 수요가 개선되었다. 초저온 부문은 우주 발사 인프라 및 항공우주 환경 시험의 수혜를 입었다. 전력 수요는 미국의 천연가스 복합화력 터빈 투자가 견인했으며, 제약 부문의 활성화는 미국의 생산능력 증설 및 리쇼어링 관련 프로젝트를 반영했다.

화학 분야 수요는 정체 상태를 유지했다. 경영진은 화학 산업 노출도가 과거 약 30%에서 약 20%로 감소함에 따라 프로세스 플로우 기술 부문의 화학 업황 회복 의존도가 낮아졌음을 강조했다. 수처리 및 폐수가 포트폴리오의 약 15%, 일반 산업이 약 20%, 가스 및 원자력이 합산 약 15%를 차지한다.

지역별로 경영진은 미국이 가장 강세를 보이는 시장이며, 유럽은 전반적으로 정체 상태, 중동은 상반기 부진에서 회복 중이라고 설명했다.

포트폴리오 및 인수합병

최근 인수한 기업들은 매출, 이익률 및 순이익 측면에서 크레인의 초기 기대치를 지속적으로 상회했다. 경영진은 이제 인수합병이 2026년 조정 순이익에 주당 약 0.30달러 기여할 것으로 예상하고 있으며, 이는 기존 추정치인 주당 0.20달러에서 상향 조정된 수치다. 이들 기업의 영업이익률은 2026년에 500bp 이상 확대될 것으로 전망된다.

크레인은 또한 투하자본수익률(ROIC) 목표치인 10%를 당초 계획보다 약 18개월 앞당겨 달성할 것으로 예상하고 있다.

진행 중인 트릴리움 펌프 인수는 수처리 및 폐수 분야에서 크레인의 입지를 강화하기 위한 것이다. 빌딩 서비스 및 유틸리티 사업의 계획된 매각이 완료되면 비주거용 건설 노출에서 완전히 철수하게 된다. 경영진은 매년 포트폴리오를 검토하고 있지만 현재로서는 추가적인 대규모 매각을 고려하고 있지 않다고 밝혔다.

경영진 실적 전망(가이던스)

경영진은 크레인이 사상 최대의 수주 잔고와 두 영업 부문 모두의 모멘텀을 안고 2027년에 진입할 것으로 기대하고 있다. 회사는 뉴욕에서 2월 9일로 예정된 인베스터 데이에서 전략, 성장 기회 및 장기 전망에 대한 자세한 내용을 공유할 예정이다.

리스크 및 주요 점검 사항

• 최근 인수한 사업들은 성과와 이익률 개선이 계획보다 앞서고 있지만 보고된 이익률을 일시적으로 희석시키고 있다.
• 화학 시장은 정체 상태를 유지하고 있다. 경영진은 적어도 2027년 상반기까지는 건설 및 내구재 주도의 본격적인 회복이 이루어지지 않을 것으로 예상하고 있다.
• 유럽은 2027년까지 정체 상태가 지속될 것으로 예상되는 반면, 미국과 중동의 화학 시장은 보다 우호적인 프로젝트 활성도를 보이고 있다.
• 트릴리움의 이익률은 크레인 전사 이익률보다 낮은 수준이며, 빌딩 서비스 및 유틸리티 매각으로 연간 예상 매출 약 1억 6,000만 달러 규모의 사업이 제외될 예정이다. 경영진은 거래 시점에 따라 트릴리움이 이로 인한 영향의 상당 부분을 상쇄할 것으로 기대하고 있다.
• 중동 시장 노출도는 회사 전체의 5% 미만이다. 이전의 선적 지연은 대부분 정상화되었으나 운송비는 여전히 높은 수준을 유지하고 있다.

애널리스트 Q&A 주요 내용

경영진은 주요 인수 사업의 상방 잠재력이 당초 예상보다 커졌다고 밝혔다. EBITDA를 6,000만 달러에서 1억 5,000만 달러로 확대하려던 기존 5개년 목표가 더 빨리 달성될 것으로 예상되며, 경영진은 5년 시점의 성장률과 이익률 역시 더 높아질 것으로 전망하고 있다.

자본 배분에 대해 크레인은 '크레인 비즈니스 시스템'을 통해 인수를 평가한다고 설명했다. 회사는 3년에서 5년의 기간 동안 포트폴리오를 강화하고 주주 가치를 창출할 수 있다면, 운영 개선 기회가 있는 자산과 이미 잘 운영되고 있는 고성장 자산 모두에 대해 열려 있는 입장을 유지하고 있다.

프로세스 플로우 기술 부문의 이익률과 관련해 경영진은 견조한 수익성 증가의 요인으로 가격 정책, 생산성, 고성장·고이익률 사업으로의 포트폴리오 전환을 꼽았다. 해당 분기의 자체 영업 레버리지는 40%를 소폭 상회했으며, 경영진은 경기 순환 주기를 통틀어 35%~40%의 레버리지 틀을 재확인했다.

경영진은 빌딩 서비스 및 유틸리티 매각과 트릴리움 인수가 1분기 말경 마무리될 것으로 예상하고 있다. 두 거래 모두 연간 전체에 영향을 미치지는 않기 때문에, 크레인은 트릴리움이 해당 연도 동안 매각으로 인한 이익 희석의 상당 부분을 상쇄할 것으로 기대하고 있다.

실적 발표 전문

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전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Welcome to the Crane Company Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I'd like to now turn the call over to Allison Poliniak, Vice President of Investor Relations. Please go ahead.

Allison Ann Poliniak-Cusic

Thank you, Stephanie, and good day, everyone. Welcome to our third 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 up our call with a few prepared remarks, Alex and Rich, after which we will respond to questions. And just a reminder, the comments 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 and tables at the end of our press release and accompanying slide presentation, both of which are available on our website at craneco.com in the Investor Relations section. Now let me turn the call over to Alex.

Alejandro Alcala

Thank you, Allison, and good morning, everyone. Crane delivered another quarter of record performance, reflecting the strength of our portfolio, broad-based demand across our end markets, exceptional execution throughout the company and the continued success of our acquisition strategy.

Demand remains very strong across Aerospace and Advanced Technologies Momentum continues to build within process for technologies, and our recent acquisitions are performing well ahead of expectations. Together, these drivers resulted in an 8% core sales growth. Strong operating leverage, record margins, record earnings and a record backlog while reinforcing our confidence in the outlook for both 2026 and 2027.

Of note, order activity was particularly strong in process both technologies, where core orders increased 20% year-over-year and 8% sequentially. This combined with exceptional strength and resilience across the aerospace and Advanced Technologies, total company backlog increased 9% year-over-year providing strong visibility as we close out the year and enter 2027.

Execution continues to be a key differentiator, adjusted operating margin expanded 130 basis points to a record 22.5% despite the temporary dilutive impact of our recent acquisitions. These results demonstrate our ability to translate growth into meaningful earnings expansion while continuing to invest for the future.

Our acquisitions continue to significantly exceed expectations. Revenue growth, margin expansion and earnings contribution are all ahead of plan. And we now expect to achieve our 10% ROIC hurdle approximately 18 months earlier than originally anticipated. We expect these acquisitions to contribute approximately $0.30 per share to 2026 earnings up from our previous expectation of $0.20 per share, with operating margins expanding more than 500 basis points this year.

These incredible results reinforce our confidence in the Crane business system and our ability to create substantial shareholder value through disciplined capital deployment. We are equally excited about the opportunities ahead including the pending acquisition of [ Trillium ] pumps. Given our strong year-to-date performance, record backlog levels and confidence in both our core and acquired businesses, we are raising our full year adjusted EPS outlook by $0.35 at the midpoint to a range of $7.23 to $7.38 per share.

Turning to Aerospace & Advanced Technologies. This segment continues to perform exceptionally well. Demand remains robust across commercial aerospace, defense and space, supported by a record backlog and a growing pipeline of opportunities. Commercial aerospace remains healthy with solid OE demand and continued strength in aftermarket.

On the defense side, investment remained very strong as customers continue to prioritize missile defense, radar, advanced power inversion and space-based capabilities. All areas where we continue to invest and win. Strong execution and continued program wins are providing increasing visibility into the future growth.

As a result, we continue to expect 2026 core growth modestly above the high end of our long-term 7% to 9% growth framework, leveraging that growth between 35% and 40%. The team continues to execute at a very high level, and we remain highly confident in the long-term growth opportunities across the segment.

Process [indiscernible] Technologies also delivered an outstanding quarter. The business returned to core growth while delivering record profitability. Core sales increased 6%. Orders grew 20%, and adjusted operating margins expanded despite the dilutive impact of recent acquisitions. More importantly, the transformation of the portfolio continues to gain momentum.

Growth was broad-based across cryogenics power, wastewater nuclear and general industrial markets. We secured additional wins in cryogenics, supporting the growing space launch market. New pharmaceutical orders related to GEO P1 capacity expansion and further wins in wastewater and power.

For the full year, our outlook has improved. Driven by solid core growth in the second half. We now expect low single-digit core growth full year and continued margin expansion. We also continue to enhance the quality of our portfolio through disciplined capital allocation.

The announced acquisition of Trillium pumps strengthens our position in the attractive water and wastewater market. while the announced divestiture of our Building Services & Utilities business further sharpen the strategic focus of the segment. Before moving on, I want to recognize and thank the outstanding Basin team.

For nearly 120 years, this business has been an important part of Crane, built by incredibly talented people who consistently deliver results the right way. We are grateful for the many contributions and proud of what they have accomplished. As they begin this next chapter, I'm confident they have a bright future ahead.

Together, these actions continue to reposition PFT around highly engineered mission-critical technologies, serving attractive growth markets, including pharmaceuticals, water and wastewater, power Progenics and nuclear. Importantly, we are not finished. We continue to see attractive opportunities to further strengthen the portfolio and remain confident in our ability to outperform the markets we serve over the long term.

To summarize, Crane is performing at a very high level. Our businesses are executing exceptionally well. Our end markets remain attractive. Our acquisitions are exceeding expectations. Our portfolio continues to become stronger and more resilient.

We will enter 2027 with record backlog, strong momentum across both segments increasing earnings power and significant strategic flexibility. As we look toward 2027, our confidence continues to grow. Over the summer, we completed strategy reviews across all our businesses, and those we reinforce our long-term growth framework.

In particular, 4 themes stand out. First, Aerospace and Advanced Technologies remains exceptionally well positioned. Strong aerospace and defense demand, combined with the benefits of years of investment in differentiated technologies, creating a resilient portfolio gives us confidence in the segment's ability to deliver attractive growth for many years to come.

Second, the transformation of the process flow technologies portfolio is gaining momentum. While the benefits are increasingly visible in our results today, we believe we are still in the early innings of our value creation journey as we continue to reshape the portfolio around higher growth, higher margin and less cyclical markets.

Third, our acquisition strategy continues to create meaningful value. We have significant capacity to deploy capital, a robust pipeline of opportunities and a proven ability to integrate businesses and accelerate earnings, margins and returns.

And last, but most important, we have an incredible intangible asset, the Crane Business System. The combination of world-class processes and a high-performance culture built on focus, intensity and accountability, continues to differentiate Crane and drive sustainable value creation.

pimply put, our businesses are performing very well. Our portfolio is stronger, it has ever been, and we continue to see significant opportunities to create value through both organic and inorganic growth.

Before turning it over to Rich, I'm pleased to announce that we will host our next Investor Day on February 9 in New York City. We look forward to sharing more about our strategy, growth opportunities and long-term outlook at that event.

With that, I'll turn the call over to Rich.

Richard Maue

Thank you, Alex. Another outstanding quarter with certainly more to come. Alex, as you just said, the Crane business system, this machine that we have and this unique culture is what enables us to consistently deliver the results that we do quarter after quarter. .

And it reminded me of the Academy Award-winning movie Fletch during an iconic scene, where Chevy Chase was impersonating Gordon Liddy, an airplane mechanic supervisor. During that scene, I was reflecting on our well oiled machines and I thought about full or coaching to our leadership teams and even how we talk with our investors when Fletch pro claims, it's so simple maybe you need to refresh your course.

It's all ball bearings nowadays guys. Now you just prepare that [indiscernible] valve with that 3 in 1 oil and some gas pads and I'm going to need about 10 courts of any freeze preferably prior. No, no make that Quaker Stan, and we'll just keep delivering top quartile results quarter after quarter.

And with that in mind, let me start off with total company results. Total sales were up 28% in the quarter compared to last year with 8% core growth, reflecting broad-based strength across both process flow technologies and aerospace and advanced technologies. Sales from our 4 acquisitions contributed 21% growth in the quarter, once again outperforming our expectations.

Adjusted operating profit increased 36%, 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 9% compared to the prior year, reflecting strength at both Aerospace and Advanced Technologies and Process flow technologies.

Core orders increased 11% year-over-year, with continued strength in Aerospace & Advanced Technologies, up 2% as expected. And when excluding a multiyear order received in the same period last year, we're up in the mid-teens and process flow technologies up an exceptional 20%.

We generated strong free cash flow in the quarter and repaid $170 million of debt, resulting in pro forma net leverage today at 1.1x a very strong balance sheet that positions us well for further M&A. Before discussing segment performance, I wanted to remind everyone that our adjusted results exclude the benefit from [indiscernible] tariff recoveries recorded during the quarter.

Once again, in our view, it's important to isolate these onetime benefits from the true underlying operating trends in the business. A few more details on the segments of the quarter here. Starting with Aerospace and Advanced Technologies.

Sales of $344 million increased 27% in the quarter, with core sales up 9.5%. Our record backlog of nearly $1.3 billion increased 9% on a core basis and increased 20%, including the impact of the DRC acquisition. Once again, demand remains very strong across our highly diverse portfolio.

Top line strength in our core business was driven by the commercial OE ramp as well as ongoing broad-based strength within the defense market. Total aftermarket remained strong, bolstered by military and when isolating prior year initial provisioning was up 11%, with core commercial aftermarket up at a high single-digit rate, exactly what we expected.

Adjusted segment margin was exceptional at 26.3% ahead of our core leverage expectations and up 100 basis points year-over-year. That performance is notable given the higher OE sales and expected dilution from the drug acquisition and it speaks to the resiliency of our margin profile, irrespective of any changes in OE aftermarket mix.

Drug continued to outperform our expectations, and our core A&E business delivered another very strong quarter. Taken all together, we remain very confident in our full year segment sales outlook and continue to expect full year core sales growth slightly ahead of our 7% to 9% algorithm.

The diversity of the overall AAT portfolio supports the durability of that 7% to 9% regardless of periodic changes in the sales composition, whether that be in OE versus aftermarket or commercial versus military. Moving on to Process Flow Technologies.

In Q3, we delivered sales of $413 million, up 29% compared to a year ago with core sales up 6.2%, and the acquisitions of [ Panametrics ] were topotecan adding nearly 24 points of growth. Demand improved significantly in the quarter. Compared to the prior year, core FX-neutral backlog of PFT increased 8% on a sequential basis was up 2% and core FX-neutral orders were up 20% year-over-year and up 8% sequentially.

Adjusted operating margin was a record 24% and was 80 basis points above the prior year. And like AAT, results were above our expectations, given better performance across both our core businesses and each of our 3 acquired businesses. In summary, another outstanding quarter.

Moving to the nonoperational items below the segments. Corporate expense for the quarter was $20 million as expected. And for the full year, we expect to be within our previously guided $80 million to $85 million range.

Net nonoperating expense in the quarter was $14 million and we continue to estimate full year 2026 net nonoperating expense of approximately $58 million.

And lastly, we continue to estimate our tax rate for the year to approximate 23%. And taking all of this into account, our performance to date as well as the risks and opportunities we see ahead.

As Alex mentioned, we are raising our adjusted full year guidance by $0.35 to a range of $7.23 to $7.38. Overall, again, an outstanding year-to-date and momentum continues to build. And with that, operator, we are now ready to take the questions.

Operator

[Operator Instructions] And we'll take our first question from Jeff Sprague with Vertical Research.

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Jeffrey Sprague

On TSI, Alex, obviously, very, very encouraging. Is the endpoint now much higher on this than you thought also, obviously, you're ahead of schedule on what you wanted to do. But as the upside were even bigger than you thought maybe you could kind of frame that relative to how you initially bridged the deal shortly after you closed it.

Jason Feldman

Yes. Thank you, Jeff. So yes, the upside is higher. I think we have that 5-year mark, where we're going to go from $60 million EBITDA to $150 million in 5 years. Now we think that's going to be quicker than that. And then when we look at the 5-year mark, the growth is going to be higher and the margins are going to be higher as well. So outside to that 5-year reference point for sure.

Jeffrey Sprague

And then one of the other sort of interesting things here, and I don't know if it's how you plan to approach all deals. But a lot of companies that are doing deals, right, seem to be allergic to trying to fix stuff.

They just want to pay for growth. Not saying that everything you'll be looking to buy is a fixer upward. But both PSI and Trillium, right? They seem to win good assets, maybe not run the way they should be an opportunity to kind of run it through your business system. As you look at the M&A pipeline, is there a lot of that sort of asset opportunity out there? .

Alejandro Alcala

Yes, Jeff. So every -- yes, that's a good observation. I think we do look at deals from the lens of CBS. So we obviously would see more opportunity than the seller.

But you feel is different. There's other deals. You may remember, Optech, which we also did earlier this year, a smaller deal we don't talk a lot about, but that was a high-growth business, very well run, and we're just adding contributing to it.

So I think we're open to a combination of circumstances, certainly not opposed to turnarounds or improvements like what we've been doing. It's all about where we see shareholder value creation and a combination of a path to improving the portfolio when we're hitting that 3-, 5-year mark.

Operator

We'll take our next question from Matt Summerville with D.A. Davidson.

Matt Summerville

I was wondering if you could maybe comment, you've sold the business up in Canada. You're in the process of selling the U.K. business -- are there more consequential portfolio actions still to be had specific to PFT?

And I'm also curious, sort of tangential to that, given that I would assume that transaction in isolation is going to be dilutive. Maybe comment on that and maybe how much Trillium can backfill relative to that dilution .

Alejandro Alcala

Yes. Thanks, Matt. So there is no more substantial divestitures that we're looking at right now. We evaluate the portfolio every year and our thinking could change.

But if you recall, like you mentioned, we divested that Crane Supply in Canada exposure to nonresidential construction. This business in BSU primary exposure is also nonresidential.

So this completes our exit of that market, a very well run business operated by a great team, but not really aligned to the markets that we're trying to expand into. As far as the accretion dilution, I'll let Rich answer that.

Richard Maue

Yes. Matt, yes, I think the way to think about the BSU business, right, we did -- this is a business that does roughly $160 million will be the outlook this year in revenue, and they're essentially at fleet margin.

So when you look at that and compare to Trillium, Trillium is $115 million in revenue with below fleet margin. So there will be some dilution to your point, obviously, the timing and the amount -- the timing of the close and the amount will coincide, right?

So we're currently thinking that, that will close sometime near the end of the first quarter. So if you tried to create a model around that, it's not a full year impact, but we would expect to offset a good portion of that with Trillium in the year. If that helps.

Matt Summerville

Perfect. And then maybe if you could just provide a little bit more end market and geographic color specific to in the context of that 20% year-on-year improvement you saw in organic order activity.

Alejandro Alcala

Yes, Matt. So it's looking quite positive from our perspective for PFT. I think a number of end markets that are seeing the growth, which is a positive from our perspective, makes us confidence on sustainability. .

We -- where we've seen the tailwind, those markets where we've been focused on over the last few years and increasing our exposure cryogenics, which is driven by space launch, water, wastewater, primarily U.S.-based business, where it's been resilient pharma, which our backlog is growing, and we expect increased investment in particular in the U.S. power as well.

So all these markets and of note, Chemical continues to be flat, where in the past, we've depended on chemical recovery to boost our growth -- that's not the case anymore in PST. So that chemical recovery is all upside still. We expect to drive growth without depending on that, and that will be additive to it.

I think regionally, U.S. continues to be the best market overall. Europe pretty flat. I think Middle East has recovered from the first half and continues to be solid, and then we have much less exposure in the rest of the world.

Operator

We'll take our next question from Nathan Jones with Stifel.

Nathan Jones

Maybe a follow up maybe a follow-up around the chemical market there. I would imagine it's probably the tale of a couple of different regions with capacity still coming out of Europe and maybe capacity improvements in the U.S. .

Maybe you could talk about chemical in a little bit more detail from a regional perspective and your outlook for a recovery there is -- I mean, if Europe just gets to being kind of a flat chemical market or something like that and stops going down, can the U.S. add growth to that, just how you view the shape of a recovery there?

Jason Feldman

Yes, Nathan. So Yes. I think you stated in Europe, we expect to continue to be flat even going to next year. I think the 2 markets that are the most interesting for us is the U.S. and Middle East. I think the U.S., as I mentioned in the last call, is held up pretty well.

As you know, when oil prices are high, there's a feedstock advantage on natural gas. So even when there's capacity globally, it makes sense for chemical companies to invest in the U.S. So we see some sporadic project activity.

Middle East also recovering. I think a full recovery that you'll notice in the P&L will come -- it's usually driven by construction, residential construction, durable goods, which I'm not expecting, not counting on at least in the first half of '27, we'll see after that.

But again, very pleased with the transformation of the portfolio that we're much less dependent on that recovery to drive growth.

Richard Maue

Maybe just to add, if you recall, our chemical exposure is mainly in the U.S., right? So maybe 70% of our chemical exposure is U.S.-based.

Nathan Jones

I'm going to try and pin you down a little bit more on PSI. The 5-year target was $150 million said you're going to get that quicker than that now. Do you have a new target for the 5-year number that's over that $150 million?

Alejandro Alcala

Yes. I mean I think -- it will grow in the 4% to 6% range and be leveraging that 35%, 40% after the 3-year mark.

Operator

We'll take our next question from Myles Walton with Wolfe Research.

Myles Walton

I'm curious if -- if I can on something off here, as were the acquisitions of PFT about 100 basis points dilutive to the reported margins, just backing into it based on -- you talked about up 500 basis points this year for the acquisitions. And then if that's the case, the 300 basis points of core margin expansion on 6% core growth, could you just maybe help us understand how you got that kind of operating leverage in the core business.

Richard Maue

Yes. I mean, in the quarter, look, it was -- I think you you're correct. Our performance from a margin point of view was exceptional. The leverage on the core business. And if I just -- I'll give both in the aerospace Advanced Technologies sector.

We were just above the high end of our 35% to 40%. So I think low 40s in terms of operating leverage there. And it's a combination of everything, right?

We just continue to execute really well from a price cost point of view, a productivity point of view and so forth, even in the face of any changes in mix. So like I said, the durability and resiliency of our Aerospace & Advanced Technologies part of the portfolio.

We're going to see that kind of performance irrespective of the composition of revenues. On the PFT side, we're already accretive in that zone today with the deals as we're exiting the year. Our core leverage in the quarter was just -- I think it was just north of 40%, something like that. So fairly solid.

Alejandro Alcala

Myles, just to add to that. We've continued to invest in PFT through the cycle. So there's no incremental cost increase that we'll see. So our leverage is pretty strong.

As we continue to mix more into these higher growth market. That's also where we are more profitable. So we see this bit of a flywheel effect where the growth is in our higher-margin businesses.

So the incremental leverage will be very solid in PST as we continue to drive growth.

Myles Walton

Got it. And just a clarification, if I could. The margin is up 500 basis points. That's for the full year. So you're saying you're already above that level here in the third and fourth quarter. Is that right? In terms of the PSI acquisition.

Richard Maue

Yes. In the second half of the -- yes, in the second half, just mathematically, I think we have to be there. .

Myles Walton

Yes, great. And then -- so then this PFT performance from a margin perspective, we should think about this as being reasonably sustainable at these levels?

Richard Maue

Yes. Yes. Again, it gets back to our core leverage rate in that 35% to 40% range through cycles. And we expect Q4 to be very, very similar. .

Operator

We'll take our next question from Dan DiCicco with BMO Capital Markets.

Daniel DiCicco

You mentioned PFT wins throughout the quarter. I think power, cryogenics wastewater. Could you provide some color on what you're seeing there?

Alejandro Alcala

Yes. If you think about those markets, Dan, cryogenic, the 2 main markets are space launch, on the rocket itself but on the launch pads and those build-outs continue.

So we're seeing good traction there. And then the second biggest market is just general aerospace in the factories with environmental testing to aerospace ramp-up continues. We see that demands and the teams are doing an exceptional job.

When you think about power again, our power business is mainly U.S.-based and the expansion on natural gas combined cycle turbines. That's where we see the momentum. And pharma -- similar in the U.S., the reshoring activity of funnels are increasing. So capacity expansion in the U.S., those type of project wins. Those are some highlights then. Always we expect to continue those markets to continue to '27.

Operator

And we'll take our next question from Ronald Epstein with Bank of America.

Unknown Analyst

This is Andrew Steiner on for Ron. I just wanted to ask a quick one on the missile demand and the broader domestic munitions ramp with several primes securing ops over the past few months.

Can you talk about how the process towards getting under contract for these programs has looked from your end so far?

Alejandro Alcala

Yes, I'll comment, and then I'll let Rich comment just we said, we're in about 15 missile programs. I think our jump-off point this year is around $35 million, mostly or different type of product power products and microwave products. And we expect next year to grow 40%, 50%.

A lot of that demand is already in the backlog. And then the projections for -- after that, 4 to 6x growth of the 35 base. And I think is where these contracts come into play, securing a bit more growth next year, but also securing that continued expansion growth through the rest of the decade. Do you have anything?

Richard Maue

I would just -- I would echo that, but just say that the demand signals that we're getting just continue to increase. We continue to see a lot of activity, a lot of RFQ work and so forth to the point that you made, we're seeing a lot of that. It's not slowed. It's increased.

Unknown Analyst

Can you just comment on what the process with these UPS actually looks like from the view of a subcontractor?

Alejandro Alcala

You broke up a little bit. Can you repeat?

Unknown Analyst

Yes. I was just looking to see if you guys could provide some color on what the UCA contracting process has looked like a view of a contract?

Alejandro Alcala

Yes, I think you asked -- I don't know if everybody heard, but we're seeing to break up how the contract processing looks for that missile demand. So we get RFP requests for tranches of multiyear opportunities for the different programs.

And we provide those updated quotes. And then we align with the customer to cure and then get a contract in a purchase order. So it's all happening at different times and different programs for different tranches for different periods of year that's on an ongoing basis. Hope that helps.

Operator

[Operator Instructions] I'd like to now announce Justin Ages with CJS Securities.

Justin Ages

Given the ongoing repositioning that you guys have done in PFT, can you give us an update on what the relative contribution of each of the end markets is you used to say like nuclear, 5%. Anything like that so we can see what the current contributions are?

Alejandro Alcala

Yes. I'll give you a quick snapshot. So I think starting with chemical, right? In the past, it's been like 30%. Now we have it close to 20% in chemical, water wastewater is around 15%; general industrial, up 20%.

And then our Power business, combined with -- when I say power, it's gas and nuclear -- it's like 15% with [indiscernible] I think those are the main ones of them.

Justin Ages

Great. And then given lingering conflict in the Middle East. Can you just remind us what your current exposure there is?

Alejandro Alcala

So exposure is mainly in PST and it's less than 5% overall. So what we -- we don't see really any material impact this year going forward. We saw some delays in shipments earlier in the year that's somewhat normalized. There's plenty of activity -- so not really a headwind that we expect.

Richard Maue

I'd say maybe tangentially, it's just the freight costs being higher and things like that, that we've been able to more than offset.

Operator

Thank you. This concludes the question-and-answer portion of today's call. I would like to now turn the call back to Alex Alcala for closing remarks.

Alejandro Alcala

Thank you for your questions and continued interest in Crane. We have significant momentum across the company, a record backlog and substantial opportunities ahead.

Most importantly, we have a proven team, a proven system. We remain highly confident in creating future and our ability to create long-term shareholder value. Thank you, and have a great day.

Operator

Thank you. This concludes today's Crane Company Third Quarter 2026 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day.