It has been about a month since the last earnings report for Crown Holdings (CCK). Shares have added about 8.5% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Crown Holdings Q1 Earnings In Line, Sales Top Estimates
Crown Holdings recorded first-quarter 2019 adjusted earnings per share of $1.05, up 11.7% year over year. Earnings came in line with the Zacks Consensus Estimate.
On a reported basis, earnings per share increased 15% year over year to 77 cents in the quarter.
Net sales in the quarter climbed 25.4% year over year to $2,755 million, beating the Zacks Consensus Estimate of $2,750 million. This upside was driven by positive impact of the Signode acquisition, increased beverage and food can volumes, partly offset by unfavorable currency-translation impact of $100 million. Global beverage can volumes grew 3% year over year in the first quarter.
Cost and Margins
Cost of products sold rose 22.2% year over year to $2,210 million. On a year-over-year basis, gross profit surged 40% to $545 million and gross margin increased to 19.7% from 17.7% in the year-ago quarter.
Selling and administrative expenses flared up 74% year over year to $157 million. Segment operating income increased 28.5% year over year to $315 million in the reported quarter. Operating margin inched up to 11.4% from 11% reported in the year-ago quarter.
Net sales in the Americas Beverage segment came in at $788 million, up 4% from the prior-year quarter’s tally of $758 million. Segment operating profit increased 15.3% year over year to $113 million.
The European Beverage segment’s sales fell 8.6% year over year to $339 million. Operating income dropped 29% year over year to $39 million.
Revenues in the European Food segment edged down 1.2% year over year to $423 million. Segment operating profit went down 14.3% year over year to $48 million from $56 million.
The Asia-Pacific segment revenues slipped 4.7% year over year to $321 million. Operating profit went up to $45 million from $44 million witnessed in the comparable period last year.
Revenues in the Transit Packaging segment totaled $569 million. Operating profit came in at $73 million.
Crown Holdings had cash and cash equivalents of $301 million at the end of the reported quarter compared with $2,201 million at the end of the prior-year quarter. The company reported cash used in operating activities of $666 million in the reported quarter compared with cash usage of $751 million recorded in the year-earlier period.
Adjusted free cash flow was $735 million in the reported quarter compared with the prior-year quarter’s $665 million. As of the quarter’s end, Crown Holdings’ long-term debt increased to $8,814 million from $7,778 million as of the year-ago quarter end.
During the reported quarter, Crown Holdings began operations on the third beverage can line at its existing plant in Phnom Penh, Cambodia, and started the second high-speed aluminum line at the new beverage can facility in Valencia, Spain. During the fourth quarter, this year, the company will commence operations in a one-line beverage can plant in Rio Verde, central Brazil.
Crown Holdings maintained its adjusted earnings per share guidance of $5.20-$5.40 for 2019. Adjusted earnings per share for second-quarter 2019 are forecast in the range of $1.43-$1.53. Adjusted free cash flow guidance remained unchanged at $775 million for the year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Crown has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Crown has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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