A month has gone by since the last earnings report for Crown Holdings (CCK - Free Report) . Shares have added about 2.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Crown due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Crown Holdings Q4 Earnings Match, Sales Lag Estimates
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.
On a reported basis, earnings were 40 cents per share against a loss of 67 cents in the prior-year quarter.
Net sales in the quarter rose 26% year over year to $2,734 million, which missed the Zacks Consensus Estimate of $2,778 million. The sales upside was driven by positive impact of the Signode acquisition, improved beverage can volumes and pass through of higher material costs to customers, partly offset by unfavorable currency translation. Global beverage can volumes grew 5% year over year in the fourth quarter.
Cost and Margins
Cost of products sold rose 26% year over year to $2,224 million. On a year-over-year basis, gross profit improved 28% to $510 million and gross margin increased 18.7% from 18.3% in the year-ago quarter.
Selling and administrative expenses flared up 61% year over year to $156 million. Adjusted segment operating income increased 14% year over year to $279 million in the reported quarter. Operating margin came down to 10% from 11% in the year-ago quarter.
Net sales at the Americas Beverage segment were $804 million, up 5.5% from $762 million in the prior-year quarter. Segment operating profit declined 7.8% to $118 million from $128 million in the year-earlier quarter.
The European Beverage segment’s sales fell 9% year over year to $295 million. Operating income dropped 65% year over year to $13 million.
Revenues at the European Food segment decreased 9% year over year to $417 million. Segment operating profit went down 38% year over year to $26 million from $42 million.
Revenues at the Asia-Pacific segment improved 4.5% year over year to $326 million. Operating profit went up to $49 million from $44 million in the prior-year quarter.
Revenues at the Transit Packaging segment totaled $595 million. Operating profit was $80 million.
Crown Holdings had cash and cash equivalents of $607 million at the end of the fourth quarter compared with $424 million at the end of the prior-year quarter. The company reported cash flow from operating activities of $571 million in fiscal 2018, compared with cash usage of $250 million in the prior fiscal.
Adjusted free cash flow was $661 million in the fourth quarter compared with $297 million in the prior-year quarter. As of the quarter-end, Crown Holdings’ long-term debt increased to $8,517 million from $5,217 million as of the year-ago quarter end.
Crown Holdings commenced production at a new one-line beverage can plant in Yangon, Myanmar, in July. The first line of the beverage can plant in Valencia, Spain, began operations in October, with the second line scheduled to begin in February. Last December, the company commenced one-line beverage can plant in Parma. The company also started operations on the third beverage can line at its existing plant in Phnom Penh, Cambodia, in January 2019. During fourth-quarter 2019, the company will begin a new one-line beverage can plant operations in Rio Verde, central Brazil.
Crown Holdings reported adjusted earnings per share of $5.20 in 2018, up 23% from $4.24 in the prior-year. Earnings matched the Zacks Consensus Estimate.
Sales increased 28% year over year to $11.15 billion. The top line lagged the Zacks Consensus Estimate of $11.21 billion.
Crown Holdings projects adjusted earnings per share in the band of $5.20-$5.40 for 2019. Adjusted earnings per share for first-quarter 2019 are estimated in the range of $1.00-$1.10.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -11.58% due to these changes.
At this time, Crown has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Crown has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.