Crown (CCK) Up 4% 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 4% 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' Earnings Beat Estimates in Q2, '21 View Up

Crown Holdings reported second-quarter 2021 adjusted earnings per share of $2.14, outpacing the Zacks Consensus Estimate of $1.80. The bottom-line figure also jumped 61% year over year.

Including one-time items, earnings per share came in at 97 cents per share during the reported quarter compared with the prior-year quarter’s 94 cents.

Net sales in the quarter came in at $2,856 million, up from the year-ago quarter’s $2,137 million. The top line benefited from increased beverage can and transit packaging sales unit volumes, pass through of higher material costs and favorable currency-translation impact. The reported figure, however, missed the Zacks Consensus Estimate of $2,888 million.

Cost and Margins

Cost of products sold increased 31.6% year over year to $2,244 million. On a year-over-year basis, gross profit climbed 41.3% to $612 million. Gross margin expanded to 21.4% from the year-ago quarter’s 20.2%.

Selling and administrative expenses flared up 22.5% year over year to $147 million. Segment operating income increased 58% year over year to $395 million during the June-end quarter. Operating margin came in at 13.8% compared with the 11.6% recorded in the prior-year quarter.

Segment Performance

Net sales in the Americas Beverage segment came in at $1,096 million, up 41% year over year. Segment operating profit jumped 52.7% year over year to $197 million.

The European Beverage segment’s sales were up 45.1% year over year to $479 million. Operating income surged 110% year over year to $78 million.
 
The Asia-Pacific segment’s revenues grew 22.2% year over year to $330 million. Operating profit went up 20.5% year over year to $47 million.

Revenues in the Transit Packaging segment totaled $637 million compared with the year-ago quarter’s $462 million. Operating profit climbed 60.7% year over year to $82 million.

Financial Update

Crown Holdings had cash and cash equivalents of $566 million at the end of second-quarter 2021 compared with $366 million at the end of year-ago quarter. The company generated $169 million cash from operating activities in the June-end quarter as against the cash utilization of $238 million in the comparable period last year. Crown Holdings’ long-term debt decreased to $7,879 million as of Jun 30, 2021 from $7,999 million as of Jun 30, 2020.

Business Update

On Apr 8, Crown Holdings entered into an agreement to divest its European Tinplate business to KPS Capital Partners, LP for €1.9 billion ($2.3 billion), while retaining 20% shareholding interest in the business. Crown Holdings expects to utilize net proceeds of the deal in reducing debt, funding beverage can capital projects as well as making share repurchases. This divesture is likely to close during third-quarter 2021. The Tinplate business consists of 44 manufacturing plants across 17 countries in Europe, the Middle East and Africa (EMEA).

Outlook

Crown Holdings projects third-quarter 2021 adjusted earnings per share between $1.90 and $2.00. For the ongoing year, the company now anticipates adjusted earnings per share to lie between $7.30 and $7.40, up from the prior guidance of $6.60 to $6.80.

Crown Holdings continues to implement several numbers of beverage-can capacity-expansion projects in a bid to meet the surging beverage-can demand, which account for around 75% of the company’s operational income. It is focused on the construction of new plants and the addition of production lines to its existing facilities. The company expects to commercialize 97 billion units of annual global beverage can capacity by the end of 2022.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 18.71% due to these changes.

VGM Scores

At this time, Crown has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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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