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Crown Holdings (CCK) Rides on Acquisitions Amid Rising Costs
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On Aug 13, we issued an updated research report on Crown Holdings, Inc. (CCK - Free Report) . The company is poised to gain from geographic expansion, acquisitions and focus on capital allocation. Its Transit Packaging business also remains a growth driver. Nevertheless, elevated freight costs, foreign currency-translation impact and raw-material inflation might impede the company’s near-term growth.
Let’s illustrate the factors in detail.
Strategic Acquisitions — A Key Strategy
Crown Holdings acquired Signode Industrial Group Holdings (Bermuda) Ltd. in April 2018. The Signode acquisition will add 69 cents per share (before amortization of intangibles) to Crown Holdings’ earnings this year. Moreover, the buyout will boost earnings per share by 15% at the mid-point and cash flow by 25% for the full year.
Focus on Geographic Expansion to Drive Growth
To meet the rising beverage-can demand, Crown Holdings intends to build new facilities and is poised to gain from the geographic expansion of its beverage can lines. In January 2018, Crown Holdings commenced operations in a new glass-bottle facility in Chihuahua, Mexico, to serve the expanding beer market. It is also in the process of constructing a new plant in the Valencia region of Spain. Production is expected to commence during fourth-quarter 2018 in this plant. Moreover, production began at a new beverage-can plant in Yangon, Myanmar, this July. A third beverage can line at the Phnom Penh, Cambodia plant is scheduled to start production in the fourth quarter.
Focus on Capital Allocation
Crown Holdings remains focused on disciplined pricing, cost control and capital allocation. The company continues to generate strong returns on invested capital and significant cash flow in 2018. The company maintained its 2018 adjusted free cash flow view of approximately $625 million and nearly $460 million of capital spending. Through 2020, the company's primary capital-allocation focus will be to reduce leverage while still investing in its business.
Crown Holdings to Gain from Transit Packaging
In second-quarter 2018, Crown Holdings’ net sales surged 41% year over year, largely due to the addition of the Transit Packaging business. Traditionally, the second quarter is the Transit business' strongest quarter. The business witnessed firm demand and benefited from the effective pass-through of inflationary increases. The business is performing well ahead of expectations and the company remains confident that its addition will create long-term value for shareholders.
Elevated Freight Costs & Strong U.S. Dollar to Hurt Earnings
Crown Holdings trimmed its adjusted earnings per share guidance to $5.15-$5.30 for 2018 due to persistent elevated freight costs in North America and unfavorable foreign currency-translation impact.
Inflation a Threat
The prices of certain raw materials used by Crown Holdings, such as steel, aluminum and processed energy, have historically been subject to volatility. Also, the company is subject to fluctuations in the cost of these raw materials due to tariffs recently imposed in the United States, which may escalate costs. The company might not be able to pass through the rise in raw material costs to its customers, without suffering loss in unit volume, revenues and operating income.
Share Price Performance
In the past year, Crown Holdings has underperformed the industry it belongs to. The stock has depreciated around 30%, performing worse than the industry’s 7% decline.
Zacks Rank & Key Picks
Crown Holdings currently carries a Zacks Rank #3 (Hold).
Chart Industries has a long-term earnings growth rate of 28.8%. The stock has surged 128% in a year’s time.
Roper Technologies has a long-term earnings growth rate of 12.3%. Its shares have rallied 25% in the past year.
Applied Industrial Technologies has a long-term earnings growth rate of 12%. The company’s shares have been up 31% over the past year.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Crown Holdings (CCK) Rides on Acquisitions Amid Rising Costs
On Aug 13, we issued an updated research report on Crown Holdings, Inc. (CCK - Free Report) . The company is poised to gain from geographic expansion, acquisitions and focus on capital allocation. Its Transit Packaging business also remains a growth driver. Nevertheless, elevated freight costs, foreign currency-translation impact and raw-material inflation might impede the company’s near-term growth.
Let’s illustrate the factors in detail.
Strategic Acquisitions — A Key Strategy
Crown Holdings acquired Signode Industrial Group Holdings (Bermuda) Ltd. in April 2018. The Signode acquisition will add 69 cents per share (before amortization of intangibles) to Crown Holdings’ earnings this year. Moreover, the buyout will boost earnings per share by 15% at the mid-point and cash flow by 25% for the full year.
Focus on Geographic Expansion to Drive Growth
To meet the rising beverage-can demand, Crown Holdings intends to build new facilities and is poised to gain from the geographic expansion of its beverage can lines. In January 2018, Crown Holdings commenced operations in a new glass-bottle facility in Chihuahua, Mexico, to serve the expanding beer market. It is also in the process of constructing a new plant in the Valencia region of Spain. Production is expected to commence during fourth-quarter 2018 in this plant. Moreover, production began at a new beverage-can plant in Yangon, Myanmar, this July. A third beverage can line at the Phnom Penh, Cambodia plant is scheduled to start production in the fourth quarter.
Focus on Capital Allocation
Crown Holdings remains focused on disciplined pricing, cost control and capital allocation. The company continues to generate strong returns on invested capital and significant cash flow in 2018. The company maintained its 2018 adjusted free cash flow view of approximately $625 million and nearly $460 million of capital spending. Through 2020, the company's primary capital-allocation focus will be to reduce leverage while still investing in its business.
Crown Holdings to Gain from Transit Packaging
In second-quarter 2018, Crown Holdings’ net sales surged 41% year over year, largely due to the addition of the Transit Packaging business. Traditionally, the second quarter is the Transit business' strongest quarter. The business witnessed firm demand and benefited from the effective pass-through of inflationary increases. The business is performing well ahead of expectations and the company remains confident that its addition will create long-term value for shareholders.
Elevated Freight Costs & Strong U.S. Dollar to Hurt Earnings
Crown Holdings trimmed its adjusted earnings per share guidance to $5.15-$5.30 for 2018 due to persistent elevated freight costs in North America and unfavorable foreign currency-translation impact.
Inflation a Threat
The prices of certain raw materials used by Crown Holdings, such as steel, aluminum and processed energy, have historically been subject to volatility. Also, the company is subject to fluctuations in the cost of these raw materials due to tariffs recently imposed in the United States, which may escalate costs. The company might not be able to pass through the rise in raw material costs to its customers, without suffering loss in unit volume, revenues and operating income.
Share Price Performance
In the past year, Crown Holdings has underperformed the industry it belongs to. The stock has depreciated around 30%, performing worse than the industry’s 7% decline.
Zacks Rank & Key Picks
Crown Holdings currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the same sector include Chart Industries, Inc. (GTLS - Free Report) , Roper Technologies, Inc. (ROP - Free Report) and Applied Industrial Technologies, Inc. (AIT - Free Report) . All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Chart Industries has a long-term earnings growth rate of 28.8%. The stock has surged 128% in a year’s time.
Roper Technologies has a long-term earnings growth rate of 12.3%. Its shares have rallied 25% in the past year.
Applied Industrial Technologies has a long-term earnings growth rate of 12%. The company’s shares have been up 31% over the past year.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>