Crown (CCK) Up 6.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Crown Holdings (CCK). Shares have added about 6.7% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Crown Holdings’ Q2 Earnings Beat, Sales Miss Estimates

Crown Holdings reported second-quarter 2020 adjusted earnings per share of $1.33, surpassing the Zacks Consensus Estimate of $1.31. The bottom-line figure, however, declined 8.9% year over year.

Including one-time items, earnings per share slid 7.8% year over year to 94 cents in the reported quarter.

Net sales in the quarter came in at $2,689 million, down from the year-ago quarter’s $3,035 million. The top-line declined on lower sales volumes due to the coronavirus pandemic, the pass through of lower material costs and an unfavorable impact of foreign currency translation. The reported figure lagged the Zacks Consensus Estimate of $2,801 million.

Cost and Margins

Cost of products sold was down 10.8% year over year to $2,155 million. On a year-over-year basis, gross profit dropped 13.6% to $534 million. Gross margin contracted to 19.8% from the year-ago quarter’s 20.4%.

Selling and administrative expenses declined 11.5% year over year to $139 million. Segment operating income decreased 16.5% year over year to $322 million during the second quarter. Operating margin came in at 11.9% compared with the 12.7% recorded in the prior-year quarter.

Segment Performance

Net sales in the Americas Beverage segment came in at $777 million, down 12.7% from the prior-year quarter’s tally of $890 million. Segment operating profit declined 7.2% year over year to $129 million.

The European Beverage segment’s sales went down 19.5% year over year to $330 million. Operating income came in at $37 million, down 38.3% year on year.

Revenues in the European Food segment climbed 3.3% year over year to $499 million. Segment operating profit increased 9.6% year over year to $68 million.

The Asia-Pacific segment’s revenues declined 15.4% year over year to $270 million. Operating profit fell 23.5% year over year to $39 million.

Revenues in the Transit Packaging segment totaled $462 million compared with the $592 million recorded in the year-ago period. Operating profit plunged 36.2% year over year to $51 million.

Financial Update

Crown Holdings had cash and cash equivalents of $366 million at the end of the reported quarter compared with the year-earlier quarter’s $342 million. The company utilized $238 million cash in operating activities in the first half of 2020 compared with $227 million in the comparable period in 2019.

As of the quarter’s end, Crown Holdings’ long-term debt decreased to $7,999 million from $8,549 million as of end of the prior year quarter. The company had $1.46 billion available under its revolving credit facility of $1.65 billion.

Outlook

Crown Holdings now expects third-quarter adjusted earnings per share (EPS) between $1.50 and $1.60. For the current year, the company expects adjusted EPS in the range of $5.10 to $5.25. The company projects adjusted free cash flow of approximately $475 million and capital expenditures of $600 million for 2020.

The company’s products are significant part of the food and beverage supply chains, and also provide critical support to the transportation industry. It is focused on ensuring that its manufacturing facilities across the globe remain operational while continuing to meet the evolving customer demand by delivering high quality products.

Crown Holdings remains on track to meet future global growth of beverage-can demand. Also, it is committed to implement the previously-announced capacity-expansion projects with its strong liquidity position and sound capital structure.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Crown has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 upward for the stock, and the magnitude of these revisions has been net zero. It comes with little surprise Crown has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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