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Reasons Why You Should Avoid Betting on Crown Holdings (CCK)

Crown Holdings CCK has failed to impress investors with its recent operational performance, which bore the brunt of a demand decline, as customer spending remains muted amid inflationary pressures and high interest rates.

CCK’s results have also been negatively impacted by unfavorable foreign currency translation and higher inventory costs.

The Zacks Rank #5 (Strong Sell) player has a market capitalization of $9.9 billion.

The company’s shares have declined 11.2% over the past six months compared with the industry’s fall of 14.4%.


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Let’s discuss the factors that might continue to take a toll on the firm.

Crown Holdings reported adjusted earnings per share of $1.46 in third-quarter 2022, missing the Zacks Consensus Estimate of $1.76. The bottom line lagged the company’s earnings guidance of $1.75-$1.85 per share. Net sales in the quarter totaled $3,259 million, missing the Zacks Consensus Estimate of $3,350 million. Unfavorable foreign currency translation had a negative impact of $127 million.

In the third quarter of 2022, the company’s earnings were affected by a stronger U.S. dollar, higher energy costs in Europe and increased interest expenses. Moreover, the company is suffering from the surge in Europe energy prices and currency translation headwinds. These factors are likely to impact the company's results in the quarters ahead.

CCK, thus, lowered its full-year adjusted earnings to $6.60-$6.70 per share from the previously stated $8.00-$8.20 per share. The mid-point of the new guidance indicates a decline of 13% from that reported a year ago.

Persisting inflationary pressures and the highest interest rates have weighed on consumer spending. Thus, the company is facing a decline in customer demand in almost every market and product line.

As a result of lower-than-expected third and fourth-quarter beverage unit volumes, Crown Holdings had to carry too much raw material inventory across its Asia and Europe operations. The decline in aluminum price did not aid the company’s excess raw material inventory. The higher-cost material impacted the third-quarter results in Europe and Asia. The same will likely continue to impact the fourth-quarter results.

Reflecting on these headwinds, the Zacks Consensus Estimate for the company’s 2022 earnings has been revised 2% downward in the past 60 days.

Stocks to Consider

Some better-ranked stocks from the Industrial Products sector are KnowBe4 KNBE, Hudson Technologies HDSN, and Hubbell HUBB. KNBE and HDSN flaunt a Zacks Rank #1 (Strong Buy) at present, while HUBB has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

KnowBe4’s earnings surprise in the last four quarters was 216.7%, on average. The Zacks Consensus Estimate for the company’s 2022 earnings is pegged at 24 cents, indicating a year-over-year increase of 118.2%. The consensus estimate has moved up 20% in the past 60 days. KNBE’s shares have gained 48.5% in the past six months.

The Zacks Consensus Estimate for Hudson’s current-year earnings per share is pegged at $2.16, suggesting an increase of 213% from that reported in the last year. The consensus estimate moved 20.7% upward in the last 60 days. Hudson has a trailing four-quarter average earnings surprise of 297%. HDSN’s shares have gained 30.2% in the last six months.

Hubbell has an average trailing four-quarter earnings surprise of 10.6%. The Zacks Consensus Estimate for HUBB’s current-year earnings is pegged at $10.41 per share. This indicates a 29.3% increase from the prior-year reported figure. The consensus estimate has been revised 4.8% north in the past 60 days. HUBB’s shares gained 32% in the last six months.

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