Report
Charles Gross
EUR 850.00 For Business Accounts Only

Morningstar | Favorable Demand Trends Point to Solid Operating Profit Gains in 2019; Raising FVE to $55 Per Share

Crown's first-quarter results support our view that demand dynamics will remain favorable during the years to come. Beverage volumes rose in nearly all regions versus the prior year, which is key to maintaining high plant utilization rates and attractive operating margins. The only exception was North America, where Crown is effectively sold out. The lone weak spot during the quarter was in European Beverage, where despite a 3% volume gain, startup costs weighed on segment profitability versus last year. With our segment forecasts are largely unchanged, we're raising our fair value estimate to $55 per share from $53 to account for updated pension assumptions and time value of money effects. Our narrow-moat rating is unchanged.

In the Americas segment, volumes have continued to hold up well, supported by especially strong consumption growth in Latin America. Two factors drove the 15% rise in segment profitability. First, sold-out conditions in North America point to high operating rates and therefore attractive operating margins for Crown. Second, Latin-American volume growth was in line with our annual expectations, increasing 7.5% from the prior year. This was led by a strong rebound in Brazil, and mid-single-digit growth in both Mexico and Colombia. We believe recent margins should persist going forward as Latin-American growth offsets our relatively dreary outlook for North America.

Asia-Pacific segment income rose slightly to $45 million from the prior year, which we view as impressive given two facility closures in China. Southeast Asia will remain a key contributor to company growth going forward. Surging beer consumption in the region has supported ambitious growth plans. Moving the equipment from the two Chinese facilities to Ho Chi Minh and Hanoi in Vietnam should bolster profit margins over the next two years. In contrast to Vietnam, extreme competition in China by state-owned companies has significantly eroded industry profitability.
Underlying
Crown Holdings Inc.

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.

Provider
Morningstar
Morningstar

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.

Analysts
Charles Gross

Other Reports on these Companies
Other Reports from Morningstar

ResearchPool Subscriptions

Get the most out of your insights

Get in touch