Why Is Crown (CCK) Up 1.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Crown Holdings (CCK). Shares have added about 1.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Crown due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Crown Holdings Q2 Earnings Beat, Dip Y/Y on Low Volumes
Crown Holdings reported second-quarter 2023 adjusted earnings per share of $1.68, beating the Zacks Consensus Estimate of $1.65. The bottom line came within the company’s EPS guidance of $1.60-$1.70. However, the same declined 20% year over year.
Including one-time items, the company reported earnings of $1.31 per share in the quarter under review compared with $2.43 in second-quarter 2022.
Net sales totaled $3,109 million, down 11% from the year-ago quarter. The top line missed the Zacks Consensus Estimate of $3,475 million. The downside was caused by lower volumes across most businesses. Higher beverage can volumes in Americas Beverage and favorable foreign currency translation offset some impacts.
Costs and Margins
The cost of products sold fell 14% year over year to $2,463 million. On a year-over-year basis, gross profit moved down 0.5% to $646 million. The gross margin improved to 20.8% from the year-ago quarter’s 18.5%.
Selling and administrative expenses rose 5.7% year over year to $148 million. Segmental operating income was $414 million compared with the prior-year quarter’s $432 million.
Benefits from contractual recovery of prior year’s inflationary cost increases in European Beverage and cost reduction initiatives in Transit Packaging were offset by lower volumes.
Segment Performances
Net sales in the Americas Beverage segment totaled $1,292 million, down 6% year over year. It lagged our estimate of $1,431 million for the quarter. Segmental operating profit dipped 2% year over year to $211 million. Our estimate for the metric was $238 million.
The European Beverage segment’s sales fell 11% year over year to $532 million. The figure fell short of our estimate of $576 million. Operating income was $74 million compared with the year-ago quarter’s $56 million. The metric outpaced our estimate of $49 million.
The Asia-Pacific segment’s revenues totaled $332 million, down 23% year over year. It missed our estimate of $365 million for the quarter. Operating profit was $38 million compared with the prior-year quarter’s $55 million. Our estimate was $42.6 million.
Revenues in the Transit Packaging segment totaled $597 million compared with the year-ago quarter’s $691 million. The figure was lower than our estimation of $680 million. Operating profit improved 20.3% year over year to $89 million. However it was lower than our projection of $93 million.
Financial Update
Crown Holdings had cash and cash equivalents of $547 million at second-quarter 2023 end, up from $438 million at the end of the prior-year quarter. The company generated $293 million of cash in operating activities in the first half of 2023 compared with $196 million in the year-ago comparable period.
Crown Holdings’ long-term debt increased to $6,986 million as of Jun 30, 2023, from $5,466 million as of Jun 30, 2022.
Outlook
Crown Holdings projects third-quarter 2023 adjusted EPS to be between $1.70 and $1.80.
The company maintains 2023 adjusted annual EBITDA growth of 8-12%. CCK has lowered 2023 adjusted EPS guidance to $6.10-$6.30 from the prior expectation of $6.20-$6.40. This reflects the impact of higher transactional foreign exchange expense and lower equity earnings. CCK expects improved operating results in global beverage and Transit Packaging in 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -7.43% due to these changes.
VGM Scores
At this time, Crown has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Crown has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Crown Holdings, Inc. (CCK) : Free Stock Analysis Report
