Crown Holdings Inc. (CCK - Free Report) will gain from solid global beverage-can demand and investments in capacity to meet the same. Strategic acquisitions to expand the company’s geographic presence and product line, as well as focus on cost control, will also drive growth. However, the impact of the coronavirus pandemic remains a concern.
The stock has an estimated long-term earnings growth rate of 5%.
The company currently carries a Zacks Rank #3 (Hold) and has a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) 2 (Buy) or 3, offer the best investment opportunities. You can see the complete list of today's Zacks #1 Rank stocks here.
Factors Favoring Crown Holdings
Over the past year, Crown Holdings’ shares have gained 20.1%, outperforming the industry’s growth of 15.7%.
Earnings Surprise History
The company has a trailing four-quarter earnings surprise of 7.97%, on average.
Return on Equity (ROE)
Crown Holdings’ trailing 12-month ROE of 32.5% reinforces its growth potential. The company’s ROE is higher than the industry’s 30.1%, highlighting its efficiency in utilizing shareholders’ funds.
Upbeat Earnings Growth Projections
The Zacks Consensus Estimate for the company’s ongoing-year earnings per share is currently pegged at $5.19, suggesting growth of 1.6% from the prior-year quarter. Over the past 60 days, the estimate has moved 2.8% north.
The beverage can continues to gain from the increasing preference among marketers and consumers globally with its inherent benefit of being infinitely recyclable. Crown Holdings is anticipated to gain from this trend.
The company anticipates the North American market to remain solid this year on strong beverage-can demand. Beverage can volumes remain strong in Brazil, Europe, Southeast Asia and the United States as consumers continue to increasingly prefer cans over other packaging options. The European food can demand remains impressive, indicating solid third-quarter crop yields. Consumer activity in Latin America is solid on robust demand. Moreover, sales volumes in the Asia Pacific will improve gradually in the third and fourth quarters as demand picks up across the region.
To meet the rising beverage-can demand, Crown Holdings intends to build new facilities and is poised to gain from the geographic expansion of beverage-can lines. Earlier this year, the company commenced production on the third production line at the Toronto, Ontario, beverage-can plant to meet the surging demand of customers.
During the June-end quarter, Crown Holdings completed the conversion of two beverage can capacity lines in Seville, Spain, from steel to aluminum. In June, the company began commercial production on the third line at the Nichols, NY facility. Last month, it commenced operations in a new one-line beverage plant in NongKhae, Thailand.
During the March-end quarter, the company started building a new state-of-the-art beverage-can facility in Bowling Green, KY, which is expected to begin operations in second-quarter 2021. Backed by rising demand expectations, the company announced that it will add a second line to that facility that will be online in late third-quarter 2021. To meet the expanding requirements of specialty cans in the Pacific Northwest, the company will construct a third line in the Olympia, Washington plant, scheduled to commence production during the third quarter of 2021.
Moreover, Crown Holdings is focused on disciplined pricing, cost control and capital allocation. The company’s efforts to pursue growth opportunities through capacity additions to the existing plants, building new plants in the existing markets, along with acquisitions in geographic areas and product lines will fuel growth.
Given the impact of the coronavirus pandemic, the company expects bleak demand in several of the industries served by its transit packaging businesses. Further, the pandemic-induced uncertainties might impact its bottom-line performance in the current year.
Stocks to Consider
Some better-ranked stocks in the Industrial Products sector include Astec Industries, Inc. (ASTE - Free Report) , Silgan Holdings, Inc. (SLGN - Free Report) and SiteOne Landscape Supply, Inc. (SITE - Free Report) . While Astec sports a Zacks Rank #1, Silgan and SiteOne carry a Zacks Rank of 2, currently. You can see the complete list of today's Zacks #1 Rank stocks here.
Astec has an estimated earnings growth rate of 13.5% for the ongoing year. The company’s shares have rallied 68.5% in a year’s time.
Silgan has a projected earnings growth rate of 28.7% for 2020. The company’s shares have appreciated 32.9% over the past year.
SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has surged 61.6% in the past year.
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