Morningstar | Crown's 2Q Exhibits Solid Fundamentals Despite Near-Term Guidance Reduction; Shares Undervalued. See Updated Analyst Note from 19 Jul 2018
Despite the initial sell-off as management trimmed EPS guidance for the year, Crown's business fundamentals still look solid. Second-quarter highlights included a 4% beverage can volume growth and Transit Packaging sales growth of 8% year over year. However, Crown also reported higher freight costs in North America and unfavorable USD exchange rate moves. Following our incorporation of Signode's results as the new "transit packaging" segment, we estimate Crown will generate roughly $11.5 billion in sales and $5.19 in adjusted EPS for 2018. With our long-term forecasts unchanged, we've left our $59 per share fair value estimate and narrow moat rating in place. Crown looks attractively priced, trading nearly 25% below our fair value estimate.Beverage performance was mixed in the quarter, with volumes in North and South America rising in the midsingle digits, offset by similar declines in Europe and the Middle East. In North America, Crown's mix favoring carbonated soft drinks was positive, driving U.S. volume growth. In contrast, weaker volumes in the U.K., Spain, and Saudi Arabia weighed on the European Beverage segment. We're optimistic that European volumes will even out as Crown shifts capacity away from the Middle East--one of its worst performing regions. Over the coming years, beverage growth will be driven by per-capita GDP and population growth in Central and South America, and Southeast Asia where the company has bolstered capacity.
The Transit Packaging business, known previously as Signode, grew 8% year on year and margins were slightly ahead of expectations. Although the sales mix is more diverse than Crown's other segments, management noted strong equipment and hardware sales growth as companies look to further automate shipping and fulfillment. This trend should spur mid-single-digit revenue and operating income growth in the segment over the coming years as consumable packaging products are purchased for a growing stock of Signode equipment.
Crown Holdings is engaged in the design, manufacture and sale of packaging products and equipment for consumer goods and industrial products. The company's packaging for consumer goods include steel and aluminum cans for food, beverage, household and other consumer products, glass bottles for beverage products, metal vacuum closures and steel crowns. The company's packaging for industrial products includes steel and plastic strap consumables and equipment, paper-based protective packaging, and plastic film consumables and equipment. The company's products include the SuperEnd? and 360 End? beverage can ends, its Easylift? aperture steel food can ends, and PeelSeam? and PeelFit? aluminum foil laminated ends.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.