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Here's Why Crown Holdings (CCK) is an Attractive Pick Now

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Crown Holdings, Inc. (CCK - Free Report) looks promising at the moment, driven by a surge in the global beverage-can demand, as consumers prefer cans over other packaging formats. The company’s investments in the construction of new can plants and the addition of new production lines to existing facilities to capitalize on this demand trend will stoke growth.

The company currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let's discuss the factors that make Crown Holdings stock a compelling investment option at the moment.

Price Performance

Crown Holdings’ shares have gained 23.6% in the past year compared with the industry’s growth of 9%
 

Zacks Investment Research
Image Source: Zacks Investment Research

Earnings Surprise History: The company has a trailing four-quarter earnings surprise of 15%, on average.

Return on Equity (ROE): Crown Holdings’ trailing 12-month ROE of 37.4% reinforces its growth potential. The company’s ROE is higher than the industry’s ROE of 32.3%, highlighting its efficiency in utilizing shareholders’ funds.

Underpriced: Looking at CCK’s price-to-earnings ratio, shares are underpriced at the current level, which seems to be attractive for investors. The company has a trailing P/E ratio of 15.2, which is below the industry average of 18.1.

Solid Q4 Results & Upbeat 2022 Outlook: Crown Holdings’ fourth-quarter 2021 adjusted earnings per share (EPS) of $1.66 beat the Zacks Consensus Estimate of $1.54 and increased 10.6% year over year. Revenues of $3,054 million surpassed the Zacks Consensus Estimate of $2,796 million and rose 24% year over year.

The company anticipates adjusted EPS for the current year between $8.00 and $8.20, reflecting year-over-year growth of 6% at the mid-point.

Upbeat Estimate Revision Activity: The Zacks Consensus Estimate for the company’s 2022 earnings has moved north by 3.8% over the past 60 days.

Positive Growth Projections: The Zacks Consensus Estimate for 2022 earnings is currently pegged at $8.19, suggesting year-over-year growth of 6.9%.

The stock has an estimated long-term earnings growth rate of 5%.

Other Driving Factors

In the past few years, beverage cans demand has been growing as it is the world’s most sustainable and recycled beverage packaging. An estimated 75% of new beverage product launches are now in cans. Crown Holdings is focused on growing its global beverage can business on the back of this strong demand trend. Demand will continue to outstrip supply in most global markets for the foreseeable future. Markets such as North America, Europe and Mexico are experiencing higher volumes and market expansion on increased beverage consumption. CCK continues to implement several expansion projects, including the construction of new plants and the addition of production lines to existing facilities to meet escalating can demand.

In North America, beverage can growth has been on the rise in recent years as new beverage products are being introduced in cans compared with other packaging. In 2021, 15 billion can units were imported in the United States. Crown Holdings completed the construction on four production lines across the Americas Beverage segment in 2021 to match this demand. The segment is set to commercialize an additional seven lines in 2022 and 2023. CCK’s Transit Packaging segment is gaining from increased food can volumes, higher beverage can equipment deliveries and contractual recovery of inflation.

Crown Holdings is focused on disciplined pricing, cost control and capital allocation. The company's primary capital-allocation focus will be to reduce leverage while still investing in its business. It continues to pursue growth opportunities through capacity additions to existing plants, new plants in existing markets, strategic acquisitions in geographic areas and product lines and making share repurchases.

Stocks to Consider

Some better-ranked stocks in the Industrial Products sector are AGCO Corporation (AGCO - Free Report) , Packaging Corporation of America (PKG - Free Report) and Deere and Company (DE - Free Report) . While AGCO flaunts a Zacks Rank #1, PKG and DE carry a Zacks Rank #2, at present.

AGCO Corp has an estimated earnings growth rate of around 12% for 2022. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 10.6%.

AGCO pulled off a trailing four-quarter earnings surprise of 56.6%, on average. In the past six months, the company’s shares have gained 13.7%.

Packaging Corp has an expected earnings growth rate of 12.6% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 0.9% in the past 60 days.

PKG has a trailing four-quarter earnings surprise of 22.7%, on average. PKG’s shares have gained 9.9% in the past six months.

Deere has a projected earnings growth rate of 19.7% for the current fiscal. The Zacks Consensus Estimate for fiscal 2022 earnings has moved north by 2.3% in the past 60 days.

DE delivered a trailing four-quarter earnings surprise of 20.6%, on average. Deere has moved up 23.3% in the past six months.

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