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Crown Holdings Inc. CCK is benefiting from rising global beverage can demand as consumers are favoring cans over other packaging formats. The company has been focusing on capacity additions, building new plants in existing markets and strategic acquisitions in a bid to capitalize on the trend.
The company’s shares have gained 43.5% over the past six months compared with the industry’s rally of 29.1%.
The company currently carries a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities.
Factors Favoring Crown Holdings
Q3 Earnings Beat: Crown Holdings reported third-quarter 2020 adjusted earnings per share of $1.96, surpassing the Zacks Consensus Estimate of $1.60. The bottom line improved 25.6% year over year.
Earnings Surprise History: The company beat estimates in each of the trailing four quarters, the average surprise being 13.75%.
Return on Equity (ROE): Crown Holding’s trailing 12-month ROE of 33.9% reinforces its growth potential. The company’s ROE is higher than the industry’s ROE of 32.9%, highlighting its efficiency in utilizing shareholder funds.
Positive Estimate Revision Activity: The Zacks Consensus Estimate for the company’s earnings for the fourth quarter and 2020 have moved north by 13% and 10%, respectively, over the past 60 days. Also, earnings estimates for the next year have improved 12% in the past few days.
Positive Growth Estimates: The Zacks Consensus Estimate for fiscal 2020 is currently pegged at $5.71, indicating year-over-year growth of 11.7%. The same for fiscal 2021 is $6.36, suggests an improvement of 11.3% from the prior-year reported figure. The stock has an estimated long-term earnings growth rate of 5%.
Crown Holdings is anticipated to gain from a rise in global beverage-can demand. Developing markets such as Mexico and Brazil have experienced higher growth rates courtesy of rising per capita income and the consequent increase in beverage consumption. While the economies in Europe and North America are more mature, there are still growth opportunities aided by beverages, such as energy drinks, teas, juices, sparkling water and craft beer, and an increased preference for cans over certain other forms of beverage packaging. With its many inherent benefits, including being infinitely recyclable, the beverage can continues to gain popularity among marketers and consumers globally.
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. In the ongoing year, the company already has commercialized more than 2 billion units of annual capacity across the Americas Beverage businesses, and will add more than 4.5 billion units of annual production capacity in 2021.
Construction is underway at a new state-of-the-art beverage can facility in Bowling Green, KY, which is expected to commence operations in second-quarter 2021. Backed by rising demand expectations, the company announced that it will add a second line to that facility that will come online in late third-quarter 2021. To meet the expanding requirements of specialty cans in the Pacific Northwest, the company will construct a third line in the Olympia, WA plant, which is scheduled to start production in third-quarter 2021. The company will add a second line in its recently-constructed facility in Rio Verde, which is expected to commence operations during the third quarter of 2021.
Other Stocks to Consider
Some other top-ranked stocks in the Industrial Products sector include AGCO Corporation AGCO, Avery Dennison Corporation AVY and SiteOne Landscape Supply, Inc. SITE. While AGCO sports a Zacks Rank #1, Avery Dennison and SiteOne Landscape carry a Zacks Rank of 2, at present. You can see the complete list of today's Zacks #1 Rank stocks here.
AGCO has a projected earnings growth rate of 15.4% for fiscal 2020. Over the past six months, the company’s shares have appreciated 55%.
Avery has an estimated earnings growth rate of 4.2% for the ongoing year. Shares of the company have gained 27% in the past six months.
SiteOne Landscape has an expected earnings growth rate of 28.6% for 2020. The stock has climbed 51.7% in six months’ time.
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