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Crown Holdings (CCK) Up 56% YTD: Will the Rally Continue?

Zacks Equity Research

Shares of Crown Holdings Inc. CCK have rallied 56.4% year to date, backed by its solid global beverage-can demand, acquisitions and focus on cost control.
 
Crown Holdings, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $8.8 billion. The company has an expected long-term earnings per share growth rate of 7%.


Notably, the stock has rallied 56.4% year to date, outperforming the industry’s growth of 56.1%.

Let’s delve deep and analyze the reasons behind the company’s impressive price performance and find out if there is room for further appreciation:

Strong Beverage Can Demand to Fuel Growth: Crown Holdings will continue to benefit from strong global beverage-can demand as consumers are favoring cans over other formats. Developing markets such as Southeast Asia and Brazil have witnessed higher growth rates due to rising per capita income and consequent increase in beverage consumption.

While the economies in Europe and North America are more mature, there are still growth opportunities backed by beverages, such as energy drinks, teas, juices, sparkling water and craft beer, and increased preference for cans over certain other forms of beverage packaging. With its many inherent benefits, including being infinitely recyclable, the beverage can continue to become the increasingly preferred package for marketers and consumers globally.

Investment in Capacity to Capitalize on Demand: Crown Holdings continues to pursue growth opportunities through capacity additions to existing plants, new plants in existing markets, and strategic acquisitions in geographic areas and product lines.

To meet volume requirements in the U.S. and Canadian beverage can markets, the company has begun construction of a third high-speed line at its Nichols, NY facility, which is anticipated to commence production during the second quarter of 2020. The conversion of an existing two-piece steel food can production line at the Weston, Ontario plant, to aluminum beverage cans, is expected to be completed in the first quarter of 2020. Both the Nichols and Weston lines will be capable of producing multiple sizes.

Additionally, during the fourth quarter of 2019, the company anticipates beginning operations at a new one-line beverage can plant in Rio Verde, Brazil. Meanwhile, Crown Holdings remains focused on disciplined pricing, cost control and capital allocation.

Cheaper than the industry: Crown Holdings has a trailing 12-month EV/EBITDA ratio of 9.43, while the industry's average trailing 12-month EV/EBITDA is 13.94.

Further, the company has a return on equity — a profitability measure — of 48.4%, better than the industry average of 24.8%. This reflects the company’s efficiency in utilizing its shareholders’ funds.

Stocks to Consider
 
Some better-ranked stocks in the Industrial Products sector are Unifirst Corporation UNF, Albany International Corporation AIN and Cintas Corporation CTAS. While Unifirst and Albany International flaunt a Zacks Rank #1 (Strong Buy), and Cintas carries a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Unifirst has a projected earnings growth rate of 15.17% for the current year. The stock has gained 38% so far this year.

Albany International has an estimated earnings growth rate of 32.3% for 2019. The company’s shares have gained 31% year to date.

Cintas Corporation has an expected earnings growth rate of 11.15% for the ongoing year. The stock has appreciated 55% year to date.

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