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Crown Holdings (CCK) Q2 Earnings Miss, Sales Trump Estimates

Zacks Equity Research

Crown Holdings, Inc. CCK 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.

Crown Holdings, Inc. Price, Consensus and EPS Surprise

Crown Holdings, Inc. Price, Consensus and EPS Surprise

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

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.

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.

Share Price Performance

Over the past year, Crown Holdings’ stock has appreciated around 37.3% compared with the industry’s growth of 57%.

Zacks Rank and Stocks to Consider

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

Some better-ranked stocks in the Industrial Products sector are Roper Technologies, Inc. ROP, John Bean Technologies Corp. JBT and CECO Environmental Corp. CECO, each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here

Roper Technologies has an estimated earnings growth rate of 9.8% for the ongoing year. The company’s shares have gained 33.8% in the past year.

John Bean Technologies has an expected earnings growth rate of 5.9% for the current year. The stock has appreciated 38% in a year’s time.

CECO Environmental has a projected earnings growth rate of 84.8% for 2019. The company’s shares have rallied 43% over the past year.

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