On May 22, we issued an updated research report on Crown Holdings Inc. (CCK - Free Report) . The company will benefit from solid global beverage-can demand and investment in capacity to meet the same. Strategic acquisitions to increase geographic presence and product line, and focus on cost control will also drive growth. However, the impact of the coronavirus pandemic remains a concern.
Upbeat Q1 Results
Crown Holdings reported first-quarter 2020 adjusted earnings per share of $1.13, which improved 7.6% year over year. Net sales in the quarter came in at $2,757 million, up from the year-ago quarter’s $2,755 million. The company beat the Zacks Consensus Estimate on both counts.
Rising Demand for Beverage Cans Bode Well
With its many inherent benefits, including being infinitely recyclability, the beverage can continues to gain increasing preference among marketers and consumers globally. Crown Holdings is anticipated to gain from a rise in global beverage-can demand.
The company anticipates the North American market to remain sold in the current year with strong beverage can demand. Beverage can volumes remained strong in Brazil, Europe, Southeast Asia and the United States, as consumers continue to increasingly prefer cans over other packaging. In 2019, the North American beverage can industry grew at its fastest pace in 25 years primarily due to the outsized portion of new beverage products being introduced in cans over other packaging formats. Overall in 2019, beverage can volumes were up 3%.
Investment in Capacity to Drive Growth
To meet the rising beverage-can demand, Crown Holdings intends to build new facilities and is poised to gain from the geographic expansion of beverage can lines. The company installed a new aluminum beverage can line at the Weston, Ontario plant, which began production in January, while the startup of the third high-speed line in Nichols, NY facility is now delayed until June, due to the coronavirus pandemic. Both Nichols and Weston lines will be capable of producing multiple can sizes.
In the March-end quarter, the company started building a new state-of-the-art beverage can facility in Bowling Green, KY, which is expected to come online in second-quarter 2021. Crown Holdings has commenced operations at a new facility in Rio Verde, Brazil. It also begun construction of a new beverage can plant in NongKhae, Thailand, which will begin production during third-quarter 2020. Further, its multi-year project to convert beverage can capacity in Spain from steel to aluminum is close to completion. Both lines in the Seville plant, which have multi-size capability, will be in commercial production early in second-quarter 2020.
Impact of COVID-19 Remains a Concern
Crown Holdings has revoked its current-year guidance due to the uncertainty of the impact and duration of the coronavirus pandemic. The Transit Packaging segment’s outlook is grim owing to the slowdown in the global manufacturing activity. Given the impact of the coronavirus pandemic, the company anticipates lower demand in several of the industries served by its transit packaging businesses. The U.S manufacturing sector, which was already reeling under U.S.-China trade tensions and waning global demand, is bearing the brunt of the coronavirus pandemic.
Crown Holdings expects slowdown in European Beverage can demand specially in Italy, Turkey and the U.K in the second-quarter due to the adverse impact of the coronavirus outbreak in the Europe.
The company’s shares have fallen 11.6% over the past three months, compared with the industry’s decline of 9.4%.
Zacks Rank & Stocks to Consider
Crown Holdings currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Silgan Holdings Inc. (SLGN - Free Report) , Broadwind Energy, Inc. (BWEN - Free Report) and Energous Corporation (WATT - Free Report) . While Silgan sports a Zacks Rank #1 (Strong Buy), Broadwind Energy and Energous carry a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Silgan has a projected earnings growth rate of 11.3% for 2020. The company’s shares have gained 10% in the past three months.
Broadwind Energy has an expected earnings growth rate of 174% for the current year. The stock has gone up 1% over the past three months.
Energous has an estimated earnings growth rate of 17.3% for the ongoing year. The company’s shares have rallied 30% in three months’ time.
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