Why Packaging Company Crown Holdings Shares Are Surging Today

Crown Holdings, Inc. CCK shares are trading higher today after the company reported better-than-expected second-quarter adjusted EPS results yesterday and raised its FY24 EPS guidance above estimate.

Net sales declined to $3.04 billion from $3.11 billion a year ago, missing the consensus of $3.06 billion.

Revenue was affected by a $94 million pass-through of lower material costs and a $13 million adverse impact from foreign currency fluctuations.

Adjusted EPS of $1.81, exceeding the consensus of $1.58.

The company reported operating cash flow of $343 million and $178 million in adjusted free cash flow for the first half of the year.

Timothy J. Donahue, Chairman, President, and Chief Executive Officer, said, “The Company performed well during the quarter, led by strong results in each of the global beverage businesses.  Benefitting from our broad geographic presence and strategic customer alliances, beverage segment income improved by 21% in the second quarter on a combined global basis.”

“Beverage can shipments improved 6% globally in the second quarter, including 9% in North America.  Beverage can shipments in Europe and Latin America were also strong and exceeded longer-term expectations of low-to mid-single digit volume growth.”

Outlook: Crown Holdings raised FY24 EPS guidance to $6.00–$6.25 (from $5.80–$6.20) vs. an estimate of $5.98 and expects free cash flow to exceed $750 million.

The company projects third-quarter adjusted EPS of $1.75–$1.85 vs. consensus of $1.79.

RBC Capital Markets analyst Arun Viswanathan writes that although CCK is raising its FY24 guidance primarily due to the second-quarter beat, investor sentiment might be cautious due to ongoing inflation impacts on consumers, affecting CCK and other packaging stocks.

The analyst notes investors will also respond positively to CCK’s new long-term leverage target of 2.5x.

However, weakness persists in CCK’s non-reportable segments, including NA aerosol and beverage can-making equipment and Transit, which are more sensitive to economic fluctuations, writes the analyst.

Overall, the analyst is positive about the NA shipment growth (+9%) and the mid-to-low single-digit growth in Europe/LATAM.

Additionally, CCK’s strong cash flow from operations reflects effective working capital management, with expectations to end 2024 below 3.0x and a new long-term target of 2.5x.

The analyst maintains an Outperform rating on the stock with a price target of $96.00.

Price Action: CCK shares are up 9% at $84.45 at the last check Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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