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Beverage Can Demand Buoys Crown Holdings Amid Coronavirus Woes

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On Jun 25, 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 expandits geographic presence and product line, as well as focus on cost control will also drive growth. However, the impact of the coronavirus pandemic is a concern.

Rising Demand for Beverage Cans Bodes Well

The beverage can continues to gain from the increasing preference among marketers and consumers globally with its inherent benefit of being infinitely recyclable. Crown Holdings is anticipated to gain from this trend.

In 2019, the North American beverage-can industry grew at its fastest pace in 25 years primarily owing to the outsized portion of new beverage products being introduced in cans over other packaging formats. Overall in the year,, beverage can volumes were up 3%. The company anticipates the North American market to remain solid this year on strong beverage-can demand. Beverage can volumes have been strong in Brazil, Europe, Southeast Asia, as consumers continue to increasingly prefer cans over other packaging.

Investment in Capacity to Boost 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, which 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 the beverage-can capacity in Spain from steel to aluminum is close to completion.
 
COVID-19 Crisis a Concern

Crown Holdings has revoked its current-year guidance due to the uncertainty of the impact and duration of the coronavirus pandemic. Given the impact of the 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 crisis. This is likely to impact demand for Crown Holdings.

The company expects a slowdown in European beverage-can demand, especially in Italy, Turkey and the U.K, in the second quarter due to the adverse impact of the coronavirus outbreak.

Price Performance

The company’s shares have gained 5.9% over the past year, outperforming the industry’s growth of 3.5%.



Zacks Rank & Stocks to Consider

Crown Holdings currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are Lakeland Industries, Inc. (LAKE - Free Report) , Broadwind Energy, Inc. (BWEN - Free Report) and Axon Enterprise, Inc. . While Lakeland Industries sports a Zacks Rank #1 (Strong Buy), Broadwind Energy and Axon carry a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lakeland Industries has a projected earnings growth rate of 127.8% for fiscal 2020. The company’s shares have surged 44.1% in the past three months.

Broadwind Energy has an expected earnings growth rate of 174% for the current year. The stock has appreciated 6% over the past three months.

Axon has an estimated earnings growth rate of 14.4% for the ongoing year. The company’s shares have rallied 21.3% in the past three months.

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