RBC Capital has sustained its positive outlook on Crown Holdings (NYSE: NYSE:CCK), reaffirming an Outperform rating and a $105.00 price target for the stock.
The firm's analyst highlighted Crown Holdings' potential to surpass market growth, projecting a 5-6% increase in volumes for 2024, compared to an industry average of roughly 0-2%. This optimistic forecast is attributed to the company's varied category mix.
Crown Holdings is reportedly experiencing margin improvements and is expected to enhance its free cash flow (FCF), with projections of over $750 million in fiscal year 2024 and more than $800 million in the following year.
These financial gains are anticipated to support share buybacks, contributing to the company's shareholder value.
Furthermore, Crown Holdings is actively reducing its debt, a process known as deleveraging. RBC Capital estimates that for every 0.5x reduction in net debt to EBITDA ratio, there is an $8 per share increase in value.
With Crown Holdings targeting a new leverage ratio of 2.5x, the firm suggests that achieving this goal could potentially lead to an increase in stock value, with a possible upside to $113 from the current $105 price target.
In other recent news, Crown Holdings, Inc. has made significant strides in recent developments. The packaging products leader has agreed with Massachusetts Mutual Life Insurance Company (MassMutual) to purchase a group annuity contract to cover benefits for approximately 12,000 participants in Crown's primary US defined benefit plans. This agreement will eliminate around $740 million in US pension plan assets and liabilities, reducing future earnings and cash flow risk.
Crown's subsidiary, Crown European Holdings S.A., has issued €600 million in senior unsecured notes to refinance existing debt. These notes carry a 4.5% interest rate and are due in 2030. Crown Holdings has also initiated a stock repurchase program of up to $2 billion by the end of 2027.
The company exceeded expectations in its Q2 performance, with earnings per share increasing from $1.31 to $1.45 and net sales reaching $3 billion, driven by a 6% rise in global beverage can volumes. Crown Holdings has updated its full-year EPS guidance to a range of $6.00 to $6.25, indicating a year-over-year growth of about 4.6%.
InvestingPro Insights
As Crown Holdings (NYSE:CCK) maintains a trajectory of growth and financial health, recent data from InvestingPro offers additional insights into the company's performance. With a market capitalization of $11.38 billion and a P/E ratio of 26.42, which adjusts to 22.59 based on the last twelve months as of Q2 2024, Crown Holdings presents a robust financial profile. The company has demonstrated a strong free cash flow yield, an InvestingPro Tip that supports RBC Capital's positive outlook on its free cash flow projections.
The stock's low price volatility, another InvestingPro Tip, suggests that Crown Holdings could be a stable investment, even as it trades near its 52-week high, indicating investor confidence. This stability is further underscored by a notable return over the last three months, with a 20.9% price total return, showcasing the company's strong recent performance. With analysts predicting profitability for the current year and an established record of profitability over the last twelve months, Crown Holdings is well-positioned to continue its momentum. For those interested in deeper analysis, InvestingPro offers additional tips on Crown Holdings, accessible via https://www.investing.com/pro/CCK.
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