On Mar 5, we issued an updated research report on Crown Holdings, Inc. (CCK - Free Report) . The company’s performance will be affected by impact of foreign currency translation, higher debt and raw-material cost inflation.
Crown Holdings delivered fourth-quarter 2018 adjusted earnings per share of $1.00, up 19% year over year. Earnings were in line with the Zacks Consensus Estimate. Net sales in the quarter rose 26% year over year to $2,734 million, but missed the Zacks Consensus Estimate of $2,778 million.
Notably, the Zacks Consensus Estimate for 2019 and 2020 earnings has been revised downward in the past 60 days, reflecting analysts’ bearish sentiments. The company’s earnings estimates have moved down 6% to $5.31 for 2019 and 7% to $5.65 for 2020.
Currency Impact to Dampen Performance
Crown Holdings expects Americas Beverage, European Beverage as well as European Food segment results to be hurt by currency fluctuations in the first two quarters of 2019. In the future, the company expects to incur additional restructuring charges related to plant closures.
Higher Debt to Hurt Margins
In fourth-quarter 2018, Crown Holdings’ interest expense was $102 million compared with $65 million in 2017, primarily due to higher outstanding debt from borrowings incurred to finance the Signode acquisition. To fund this deal, Crown Holdings issued €500 million of 2.875% senior unsecured notes due 2026, €335 million of 2.250% senior unsecured notes due 2023 and $875 million of 4.750% senior unsecured notes due 2026. Thus, risk of rising interest rates is a matter of concern as higher interest expenses will continue to thwart margins.
Raw Material Inflation is a Woe
Crown Holdings uses various raw materials, such as steel, aluminum, tin, water, natural gas, electricity and other processed energy in its manufacturing operations. Cost of these raw materials has flared up due to the tariffs imposed in the United States, which may escalate costs. The company may not be able to pass through the rise in raw materials costs to customers without suffering losses in unit volume, revenues and operating income.
Crown Holdings, Inc. Price and Consensus
Zacks Rank and Stocks to Consider
Crown Holdings currently carries a Zacks Rank #4 (Sell)
A few better-ranked stocks in the Industrial Products sector are Mueller Industries, Inc (MLI - Free Report) , Terex Corporation (TEX - Free Report) and Albany International Corp (AIN - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Mueller Industries has expected earnings growth rate of 2.2% for 2019.
Terex has an expected earnings growth rate of 41.2% for the current year.
Albany International has expected earnings growth rate of 44.7% for 2019.
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