Back to top

Image: Bigstock

Crown (CCK) Up 9.2% Since Last Earnings Report: Can It Continue?

Read MoreHide Full Article

It has been about a month since the last earnings report for Crown Holdings (CCK - Free Report) . Shares have added about 9.2% 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 its most recent earnings report in order to get a better handle on the important drivers.

Crown Holdings Q2 Earnings Miss, Sales Trump Estimates

Crown Holdings reported second-quarter 2019 adjusted earnings per share of $1.46, down 5.8% year over year. The earnings figure missed the Zacks Consensus Estimate of $1.49.

On a reported basis, earnings per share increased 3% year over year to $1.02 in the quarter.

Net sales in the quarter came in at $3,035 million, down from the year-ago quarter’s $3,046 million. The reported figure, however, beat the Zacks Consensus Estimate of $3,029 million. The top-line figure reflects unfavorable currency translation of $80 million, offset by higher beverage can volumes. Crown Holdings achieved strong global beverage can volume growth during the second quarter.

Cost and Margins

Cost of products sold was down 2% year over year to $2,417 million. On a year-over-year basis, gross profit grew 6.5% to $618 million and gross margin inched up to 20% from the year-ago quarter’s 19%.

Selling and administrative expenses slipped 1.2% year over year to $157 million. Segment operating income edged down 0.7% year over year to $386 million during the June-end quarter. Operating margin came in at 12.7%, flat year on year.

Segment Performance

Net sales in the Americas Beverage segment came in at $890 million, up 5% from the prior-year quarter’s tally of $848 million. Segment operating profit increased 23% year over year to $139 million.

The European Beverage segment’s sales went up 1.2% year over year to $410 million. Operating income was up 1.7% year over year to $60 million.

Revenues in the European Food segment fell 6% year over year to $483 million. Segment operating profit dropped 27% year over year to $62 million from $85 million.

The Asia-Pacific segment revenues were down 4% year over year to $319 million. Operating profit went up to $51 million from $47 million witnessed in the comparable period last year.

Revenues in the Transit Packaging segment totaled $592 million compared to $620 million recorded in the year-ago period. Operating profit declined 14.8% year over year to $80 million.

Financial Update

Crown Holdings had cash and cash equivalents of $342 million at the end of the reported quarter compared with the $298 million at the end of the prior-year quarter. The company reported cash used in operating activities of $227 million in the second quarter compared with cash usage of $492 million recorded in the year-earlier period.

Adjusted free cash flow was $360 million in the June-end quarter compared with the prior-year quarter’s $330 million. As of the quarter’s end, Crown Holdings’ long-term debt decreased to $8,549 million from $9,236 million as of the year-ago quarter end.

Business Update

During the reported quarter, Crown Holdings installed beverage-can capacity additions, began operations on the third beverage can line at its existing plant in Phnom Penh, Cambodia, started one-line high-speed plant in Parma, Italy, and a two-line high-speed plant in Valencia, Spain. This November, the company will commence operations in a one-line beverage can plant in Rio Verde, central Brazil. In order to support volume requirements in the North American beverage can business, the company has started construction of a third high-speed line at Nichols, New York facility, which will commence production during the second quarter of 2020.

Outlook

Crown Holdings now expects adjusted earnings per share to be $5.05-$5.20 for 2019, compared to prior range of $5.20 and $5.40. The muted guidance is mainly due to lower-than-expected full-year results in the European Food and Transit Packaging segments. Further, adjusted earnings per share for third-quarter 2019 are projected at $1.50-$1.60. Adjusted free cash flow is expected between $725 million and $750 million for the ongoing year compared with the previous estimate of $775 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -8.94% due to these changes.

VGM Scores

Currently, Crown has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Crown has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Crown Holdings, Inc. (CCK) - free report >>

Published in