Crown Holdings, Inc. (NYSE:CCK) delivered first-quarter 2018 adjusted earnings per share of 94 cents, which increased 22% year over year. Also, the figure comfortably beat the Zacks Consensus Estimate of 80 cents. Earnings also came ahead of management’s guided range of 75-85 cents.
On a reported basis, the company reported earnings of 67 cents per share compared to 77 cents in the prior-year quarter.
Net sales in the quarter rose 15.6% year over year to $2,197 million. The revenue figure also surpassed the Zacks Consensus Estimate of $2,071 million. Year-over-year sales growth was driven by improved beverage can volumes, pass through of higher material costs to customers and favorable currency-translation impact.
Crown Holdings, Inc. Price, Consensus and EPS Surprise
Crown Holdings, Inc. Price, Consensus and EPS Surprise | Crown Holdings, Inc. Quote
Cost and Margins
Cost of products sold increased 18% year over year to $1,808 million. On a year-over-year basis, gross profit improved 5% to $389 million, while gross margin contracted 180 basis points (bps) to 17.7% in the quarter.
Selling and administrative expenses remained flat year over year at $90 million. Adjusted segment operating income increased 5.9% year over year to $234 million in the reported quarter. Operating margin shrunk 90 bps to 10.7% from 11.6% recorded in the year-ago quarter.
Segment Performance
Net sales from the Americas Beverage segment were $758 million, up 12.5% from $674 million reported in the year-ago quarter. Segment operating profit decreased 5.8% to $98 million from $104 million in the year-earlier quarter.
The European Beverage segment’s sales increased 22% year over year to $371 million. Operating income rose 10% year over year to $55 million.
Revenues in the European Food segment were up 13% year over year to $428 million. Segment operating profit went up 9.8% to $56 million from $51 million recorded in the year-ago quarter.
Revenues in the Asia-Pacific segment improved 21% year over year to $337 million. Operating profit went up to $44 million from $39 million reported in the prior-year quarter.
Financial Update
Crown Holdings had cash and cash equivalents of $2,201 million at the end of the first quarter compared with $338 million at the end of the prior-year quarter. The company recorded cash used in operating activities of $751 million in the reported quarter compared to cash usage of $577 million recorded in the year-ago quarter.
Adjusted free cash flow was $665 million in the first quarter compared with $427 million in the prior-year quarter. As of the quarter end, Crown Holdings’ total debt increased to $7,810 million compared with $5,243 million as of the year-ago quarter end.
On Apr 3, Crown Holdings concluded the previously-announced acquisition of Signode for $3.9 billion. The buyout will add a portfolio of premier transit and protective packaging franchises to Crown Holdings’ metal packaging business, and significantly boost its free cash flow as well.
Outlook
Crown Holdings raised its adjusted diluted earnings per share guidance of $5.35-$5.55 from $4.30-$4.50, for full-year 2018. It also projects second-quarter 2018 earnings per share of $1.55-$1.65.
The company expects to begin production at the new one-line beverage can plant in Yangon, Myanmar, during second-quarter 2018, as well as the new two-line beverage can plant in Valencia, Spain, during fourth-quarter 2018. The Valencia plant will commence conversion from steel to aluminum for beverage cans in the expanding Spanish market. Crown Holdings will also build a third beverage can line at its existing plant in Phnom Penh, Cambodia, to start production during the fourth quarter. Additionally, the new glass facility in Chihuahua, Mexico, began operations in January 2018 to serve the growing beer market in the northern part of the country.
These initiatives reflect that beverage cans continue to be the increasingly preferred package of beverage marketers. Thus, growing demand for beverage can volumes will drive the company’s performance.
Share Price Performance
In the past year, Crown Holdings has underperformed the industry it belongs to. Its shares have lost 6.5%, while the industry recorded growth of 6.1%.
Zacks Rank & Other Stocks to Consider
Crown Holdings carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the same sector are Deere & Company (NYSE:DE) , Caterpillar Inc. (NYSE:CAT) and Sealed Air Corporation (NYSE:SEE) . While Deere sports a Zacks Rank #1 (Strong Buy), Caterpillar and Sealed Air carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Deere has a long-term earnings growth rate of 5.7%. Its shares have surged 36%, over the past year.
Caterpillar has a long-term earnings growth rate of 12%. The company’s shares have rallied 64.5% over the past year.
Sealed Air has a long-term earnings growth rate of 11.3%. The stock has gained 0.8% in a year’s time.
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Crown Holdings, Inc. (CCK): Free Stock Analysis Report
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