Why Is Crown (CCK) Down 2.7% Since Last Earnings Report?

A month has gone by since the last earnings report for Crown Holdings (CCK). Shares have lost about 2.7% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Crown due for a breakout? 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 Q4 Earnings & Revenues Beat Estimates

Crown Holdings reported fourth-quarter 2019 adjusted earnings per share of $1.04, which surpassed the Zacks Consensus Estimate of 95 cents. The bottom line also improved 4% year over year and came in higher than management’s guidance of 93-98 cents.

Including one-time items, earnings per share improved 60% year over year to 64 cents in the reported quarter.

Net sales in the quarter came in at $2,791 million, up from the year-ago quarter’s $2,734 million. The reported figure also outpaced the Zacks Consensus Estimate of $2,712 million.

Cost and Margins

Cost of products sold was up 2% year over year to $2,267 million. On a year-over-year basis, gross profit rose 3% to $524 million. Gross margin expanded to 18.8% from the year-ago quarter’s 18.7%.

Selling and administrative expenses were up 3% year over year to $124 million. Segment operating income increased 2% year over year to $285 million during the fourth quarter. Operating margin came in at 10.2%, flat year over year.

Segment Performance

Net sales in the Americas Beverage segment came in at $856 million, up 6.5% from the prior-year quarter’s tally of $804 million. Segment operating profit improved 25% year over year to $148 million.
The European Beverage segment’s sales went up 12.5% year over year to $332 million. Operating income was up 108% year over year to $27 million.

Revenues in the European Food segment fell 4% year over year to $400 million. Segment operating profit declined 39% year over year to $16 million.

The Asia-Pacific segment’s revenues inched up 1.5% year over year to $331 million. Operating profit improved to $51 million from prior-year quarter figure of $49 million.

Revenues in the Transit Packaging segment totaled $549 million compared with $595 million recorded in the year-ago period. Operating profit declined 21% year over year to $63 million.

Financial Update

Crown Holdings had cash and cash equivalents of $607 million at the end of 2019, flat compared with 2018-end. The company generated $1,163 million of cash from operating activities in 2019 compared with the prior-year figure of $571 million.

As of 2019 end, Crown Holdings’ long-term debt decreased to $7,818 million from $8,517 million as of end of the prior year.

2019 Results

Crown Holdings reported adjusted earnings per share of $5.11 in 2019, down 2% from the prior-year reported figure of $5.20. Earnings beat the Zacks Consensus Estimate of $5.02 and management’s guidance of $5.00-$5.05. Including one-time items, the bottom line came in at $3.78, up 15% from $3.28 reported in 2018.

Sales rose 5% year over year to $11.7 billion from the prior-year figure of $11.2 billion. The top line surpassed the Zacks Consensus Estimate of $11.6 billion.

Outlook

Crown Holdings now expects adjusted earnings per share to be $5.40-$5.60 for 2020. The mid-point of the guidance range reflects year-over-year growth of 8%. Beverage can volumes are expected to be up more than 5% in 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -16.07% due to these changes.

VGM Scores

At this time, Crown has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Crown has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.