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Metal Can Industry to Gain on Strong Demand: 3 Stocks to Watch

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The can industry, which manufactures light metal cans made of aluminum or steel and are used as beverage and food containers, has been witnessing unprecedented demand over the past few years. Customers are now preferring cans over plastic owing to increasing awareness about environmental problems. Cans help increase the shelf life and maintain the quality of the food, and is the world’s most sustainable and recycled packaging option.

Changing lifestyle choices, population growth and increasing disposable income have also been instrumental in this shift of preference. An estimated 75% of new beverage product launches are in cans. The COVID-19 pandemic also provided a boost to the beverage and food can industry as customers are opting to buy multiple packs of beverages and canned food for at-home consumption.

Developing markets have witnessed higher growth rates owing to rising population and increasing consumer spending and consequent increase in beverage consumption. North America is expected to hold the largest beverage cans market share in the foreseeable future. The increasing health consciousness among consumers has led to high demand for healthy and nutritious beverages in the United States. Moreover, due to the growing consumer awareness regarding environmental pollution, can makers are utilizing sustainable packaging solutions. This, in turn, will drive growth in Europe. The European Union's initiative to achieve the goal of circular economy will continue to fuel demand for cans.

By 2025, the global beverage can industry is projected to grow by approximately 100 billion units. To capitalize on this growth, manufacturers are aggressively increasing their capacity. Westminster, CO based Ball Corporation (BLL - Free Report) , which makes aluminum packaging products for the beverage and other products, has been investing in global projects in North America, South America and EMEA that are expected to add at least 25 billion units of contracted beverage can capacity by year-end 2023 (off a 2019 base of 100 billion units).

Its close competitor, Yardley, PA based Crown Holdings, Inc. (CCK - Free Report) that offers steel and aluminum cans for food, beverage, household and other products has also been implementing several expansion projects. By the end of 2022, the company expects to add 15 billion units of annual capacity to the 2019 base of 70 billion units.

Luxembourg-based Ardagh Group S.A., which manufactures and supplies rigid packaging solutions primarily for the food and beverage markets worldwide, recently increased its Business Growth Investment program spanning 2021-2024 from $1.8 billion to $2.1 billion to make room for additional beverage can opportunities. The program is on track in all regions, with new lines in Olive Branch, MS, ramping up; Winston-Salem, NC, expansion under way; and new Huron, OH, plant under development.

Meanwhile, Stamford, CT-based Silgan Holdings Inc. (SLGN - Free Report) that makes metal food containers has increased its overall share of the metal food container market in the United States from approximately 10% in 1987 to slightly more than half of the market in 2020 via acquisitions and organic growth. On top of this, the company continues to make significant capital investments to enhance the competitive advantages of metal packaging for food.

Ball Corporation, Crown Holdings and Silgan all fall under the Containers - Metal and Glass industry. The industry currently carries a Zacks Industry Rank #124, which places it in the top 49% of more than 250 Zacks industries. The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Ball Corporation has a projected earnings growth rate of 18.2% for the current fiscal year. The Zacks Consensus Estimate for this year’s earnings has gone up 2% in the past 60 days. The company has a trailing four-quarter earnings surprise of 10.2%, on average. It has an estimated long-term earnings growth rate of 5%. Shares of this Zacks Rank #3 (Hold) company have gained 15.5% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Crown Holdings, a Zacks Ranked #3 stock, has surged 56% in a year’s time. The Zacks Consensus Estimate for fiscal 2021 earnings has moved up 1% over the past 60 days and indicates year-over-year improvement of 15.7%. The company has a trailing four-quarter earnings surprise of 18.2%, on average. The company has an estimated long-term earnings growth rate of 5%.

Silgan, which currently carries a Zacks Rank #3, has a projected earnings growth rate of 10.5% for the current fiscal. The Zacks Consensus Estimate for fiscal 2021 earnings indicates year-over-year improvement of 10.5%. The company has a trailing four-quarter earnings surprise of 15.8%, on average. The company has an estimated long-term earnings growth rate of 5%. Its shares have appreciated 26.5% in a year.
 

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