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Here's Why You Should Dump Crown Holdings (CCK) Right Now
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Crown Holdings, Inc. (CCK - Free Report) has witnessed significant price decline over the past year due to unfavorable foreign currency-translation impact, high level of indebtedness, material cost inflation as well as higher freight costs. If you are still holding on to shares of Crown Holdings in your portfolio, it is time you dump those as chances of favorable returns in the near term appear bleak.
Similar to wise buying decisions, offloading certain underperformers at the right time helps maximize portfolio returns. The company’s Zacks Rank #4 (Sell) only reflects its innate weakness. Further, its negative earnings estimate revisions indicate dismal prospects for the company in near term.
Let’s take a look at factors behind this dismal performance.
Estimates Moving South
The Zacks Consensus Estimate for 2018 and 2019 earnings has been revised downward over the past 60 days, reflecting analysts’ bearish sentiments. Crown Holdings’ earnings estimate has moved down 3.9% to $5.23 for 2018 and 3.5% to $5.75 for 2019.
Price Performance
Shares of this packaging company have plunged approximately 27% over the past year, faring worse than the industry’s decline of 3%.
Cost Inflation, Higher Debt Remain Headwinds
Crown Holdings trimmed its adjusted earnings per share guidance of $5.15-$5.30 for full-year 2018 due to persistent elevated freight costs in North America and foreign currency-translation impact.
Further, higher debt level remains a major concern for the company. In second-quarter 2018, Crown Holdings incurred interest expense of $103 million compared to $61 million witnessed in second-quarter 2017, primarily due to higher outstanding debt from borrowings incurred to finance the Signode acquisition. Thus, risk of rising interest rates remains a matter of concern as higher interest expenses will continue to thwart margins.
Also, the company is subject to fluctuations in the cost of raw materials due to tariffs imposed in the United States. The company may not be able to pass through the rise in raw materials costs to its customers, without suffering loss in unit volume, revenues and operating income.
Looking at the prevailing challenges and an unfavorable Zacks rank, it is wise to stay away from investing in Crown Holdings stock right now.
Atkore International has a long-term earnings growth rate of 10%. The stock has surged 78% in a year’s time.
Caterpillar has a long-term earnings growth rate of 13.3%. Its shares have improved 22% over the past year.
Grainger has a long-term earnings growth rate of 12.5%. The company’s shares have appreciated 128% during the past year.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early. See Zacks' 3 Best Stocks to Play This Trend >>
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Here's Why You Should Dump Crown Holdings (CCK) Right Now
Crown Holdings, Inc. (CCK - Free Report) has witnessed significant price decline over the past year due to unfavorable foreign currency-translation impact, high level of indebtedness, material cost inflation as well as higher freight costs. If you are still holding on to shares of Crown Holdings in your portfolio, it is time you dump those as chances of favorable returns in the near term appear bleak.
Similar to wise buying decisions, offloading certain underperformers at the right time helps maximize portfolio returns. The company’s Zacks Rank #4 (Sell) only reflects its innate weakness. Further, its negative earnings estimate revisions indicate dismal prospects for the company in near term.
Let’s take a look at factors behind this dismal performance.
Estimates Moving South
The Zacks Consensus Estimate for 2018 and 2019 earnings has been revised downward over the past 60 days, reflecting analysts’ bearish sentiments. Crown Holdings’ earnings estimate has moved down 3.9% to $5.23 for 2018 and 3.5% to $5.75 for 2019.
Price Performance
Shares of this packaging company have plunged approximately 27% over the past year, faring worse than the industry’s decline of 3%.
Cost Inflation, Higher Debt Remain Headwinds
Crown Holdings trimmed its adjusted earnings per share guidance of $5.15-$5.30 for full-year 2018 due to persistent elevated freight costs in North America and foreign currency-translation impact.
Further, higher debt level remains a major concern for the company. In second-quarter 2018, Crown Holdings incurred interest expense of $103 million compared to $61 million witnessed in second-quarter 2017, primarily due to higher outstanding debt from borrowings incurred to finance the Signode acquisition. Thus, risk of rising interest rates remains a matter of concern as higher interest expenses will continue to thwart margins.
Also, the company is subject to fluctuations in the cost of raw materials due to tariffs imposed in the United States. The company may not be able to pass through the rise in raw materials costs to its customers, without suffering loss in unit volume, revenues and operating income.
Looking at the prevailing challenges and an unfavorable Zacks rank, it is wise to stay away from investing in Crown Holdings stock right now.
Some better-ranked stocks in the sector include Atkore International Group Inc. (ATKR - Free Report) , Caterpillar Inc. (CAT - Free Report) and W.W. Grainger, Inc. (GWW - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Atkore International has a long-term earnings growth rate of 10%. The stock has surged 78% in a year’s time.
Caterpillar has a long-term earnings growth rate of 13.3%. Its shares have improved 22% over the past year.
Grainger has a long-term earnings growth rate of 12.5%. The company’s shares have appreciated 128% during the past year.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>