SouthernSun SMID Cap on Crane NXT Co. (CXT)

Pitch Summary Crane NXT (CXT) was a bottom contributor in the SMID Cap strategy during the quarter despite delivering solid operating performance in its most recent earnings release. The company reported sales of $445 million (+10% YoY) with a core sales increase of 1%, adjusted operating margin of 24.7%, and adjusted EPS of $1.28, while also raising full-year sales growth guidance. However, management also highlighted macroeconomic uncertainty impacting demand in the Payment Innovations segment, which we believe weighed on sentiment even as the Security & Authentication Technologies segment continued to show momentum and free cash flow conversion remained strong. Crane NXT also announced and completed the first phase of its strategic acquisition of an Italian technology firm - Antares Vision S.p.A. Antares is a global provider of inspection, detection and track-and-trace solutions that will expand the company’s exposure into life sciences (including pharmaceutical traceability) and the food & beverage sectors; the closing is expected in 2026. CXT is a recent addition to the portfolio, and we spent time with management in the 4th quarter and have further plans to visit with the team in 1q26. We are confident the business fundamentals and capital allocation discipline align with our objectives for risk and long-term capital appreciation.

BSD Analysis Crane NXT is the specialized tech power behind the world’s most secure physical and digital transactions, from high-security banknotes to advanced product authentication. Since its spinoff, the firm has operated as a lean, high-margin innovator, feasting on the demand for "trust technologies" in an era of deepfakes and sophisticated counterfeiting. They are aggressively expanding into the digital space, leveraging their deep cryptography expertise to secure global supply chains and high-value luxury goods. It’s a high-moat, niche monopoly that proves physical security and digital encryption are two sides of the same very profitable coin in 2026.

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