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Crown Holdings (CCK) Misses on Q3 Earnings, Lowers '23 View

Crown Holdings, Inc. CCK reported third-quarter 2023 adjusted earnings per share (EPS) of $1.73, missing the Zacks Consensus Estimate of earnings of $1.74 per share. The bottom line was within the company’s EPS guidance of $1.70-$1.80 and improved 18.5% year over year. This was aided by higher beverage can volumes in North America, which offset weakness in volumes in other markets, as well as benefits from CCK’s overhead cost-reduction program.

Including one-time items, the company reported earnings (from continuing operations) of $1.31 per share in the quarter under review compared with earnings of $1.06 per share in third-quarter 2022.

Net sales totaled $3,069 million, down 5.8% from the year-ago quarter. The top line missed the Zacks Consensus Estimate of $3,279 million. Higher beverage can volumes in North America (13%) and favorable foreign currency translation were offset by lower volumes in other markets, particularly Asia.

Crown Holdings, Inc. Price, Consensus and EPS Surprise

 

Crown Holdings, Inc. price-consensus-eps-surprise-chart | Crown Holdings, Inc. Quote

Costs and Margins

The cost of products sold fell 11% year over year to $2,427 million. On a year-over-year basis, gross profit increased 20.5% to $642 million. The gross margin improved to 20.9% from the year-ago quarter’s 16.4%.

Selling and administrative expenses rose 5.7% year over year to $129 million. Segmental operating income was $430 million compared with the prior-year quarter’s $336 million.

Income from operations in the quarter under review was $374 million, up 26% from the year-ago quarter’s figure of $297 million. Benefits from contractual recovery of the prior year’s inflationary cost increases in Europe, higher beverage can volumes in North America and cost-reduction initiatives in Transit Packaging led to the improvement.

Segmental Performances

Net sales in the Americas Beverage segment totaled $1,295 million, down 1.3% year over year. The figure lagged our estimate of $1,336 million for the quarter. The segment’s operating profit increased 25% year over year to $232 million. Our estimate was $243 million.

The European Beverage segment’s sales fell 3% year over year to $536 million. The figure surpassed our estimate of $531 million. Operating income was $80 million, marking a substantial improvement from the year-ago quarter’s $20 million. The metric outpaced our projected figure of $57 million.

The Asia-Pacific segment’s revenues totaled $307 million, down 18% year over year. It missed our estimate of $364 million for the quarter. Operating profit was $33 million compared with the prior-year quarter’s $35 million. Our estimate for the same was $43 million.

Revenues in the Transit Packaging segment totaled $554 million compared with the year-ago quarter’s $609 million. The figure was lower than our estimation of $676 million. Operating profit improved 18.7% year over year to $89 million. However, the figure was lower than our projection of $103 million.

Financial Update

Crown Holdings had cash and cash equivalents of $807 million at third-quarter 2023 end, up from $368 million at the end of 2022. The company generated $832 million in cash from operating activities in the first nine-month period of 2023 compared with $134 million in the year-ago comparable period.

Crown Holdings’ long-term debt increased to $6.24 million as of Sep 30, 2023, lower than $6.7 million as of Dec 31, 2022.

Outlook

Crown Holdings projects fourth-quarter 2023 adjusted EPS to be between $1.40 and $1.50. The midpoint of the guidance suggests year-over-year growth of 24%.

CCK has lowered its 2023 adjusted EPS guidance to $6.00-$6.10 from the prior expectation of $6.10-$6.30. The company had reported an adjusted EPS of $6.75 in 2022. While the company expects results in Americas, European Beverage and Transit Packaging to improve, these gains will be offset by the ongoing weakness in Asia and the North American aerosols business.

The company has targeted capital spending of $900 million in 2023. Adjusted free cash flow is expected to be approximately $500 million.

Price Performance

Crown Holdings’ shares have gained 15.4% in the past year compared with the industry’s 0.4% growth.

 

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Zacks Rank

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

Stocks to Consider

Some better-ranked stocks from the Industrial Products sector are Applied Industrial Technologies AIT, Astec Industries, Inc. ASTE, and Brady BRC. Each of these companies currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Industrial has an average trailing four-quarter earnings surprise of 15%. The Zacks Consensus Estimate for AIT’s 2023 earnings is pegged at $9.13 per share, which indicates year-over-year growth of 2%. The estimate has moved up 2% in the past 60 days. Its shares have gained 32% in the last year.

Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $3.24 per share, indicating year-over-year growth of 163%. The consensus estimate for 2023 earnings has moved 1% north in the past 60 days. ASTE’s shares have gained 7% in the last year.

The Zacks Consensus Estimate for Brady’s 2023 EPS is pegged at $3.62. The consensus estimate for 2023 earnings has moved 13% north in the past 60 days and suggests year-over-year growth of 9.9%. The company has a trailing four-quarter average earnings surprise of 7.2%. Shares of BRC have rallied 17% in the last year.

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