Today's surge in Crown Holdings' share price can be attributed to...
Packaging giant Crown Holdings' shares saw a lift on Tuesday after the company presented its first-quarter 2024 financial results. As of 11:15 a.m. ET, Crown Holdings stock was up approximately 3%, although it had surged nearly 6% earlier in the day.
Revenue dip but growing shipments
Crown Holdings' Q1 revenue took a 6% hit compared to the previous year, amounting to roughly $2.8 billion. However, this dip is less concerning when considering the company's arrangements with specific customers that absorb material cost fluctuations. This impacted the revenue negatively in Q1. On a positive note, shipments increased, with beverage-can shipments seeing a 2.5% rise, a noteworthy metric.
The company's net income for Q1 plummeted by nearly 24% to $93 million. This translated into an earnings per share (EPS) of $0.56. Although this represented a decrease, analysts remained relatively unfazed as they had anticipated similar results.
Moreover, the company's management kept their full-year adjusted EPS projection unchanged at $5.80 to $6.20, implying that the company is on track to meet its targets for the year despite the weak Q1 results.
A reasonably priced stock
As of this writing, Crown Holdings stock is trading at approximately 22 times its trailing earnings, which is close to the S&P 500's average. Furthermore, the company's dividend yield of 1.2% is consistent with the S&P 500's average.
While Crown Holdings stock may appear reasonably priced in comparison to the S&P 500, its moderate growth prospects and profitability challenges suggest that it may not be the most compelling investment opportunity at present. There likely exist several other "safe stocks" with superior upside potential.
Looking ahead
Crown Holdings has displayed consistent quarterly performance, with a strong EBITDA of $1.85 billion in the previous year and an impressive gross profit margin of 21.3%. Analysts anticipate EBITDA to reach $1.916 billion in FY24, while raising EPS forecasts to $6.30 from $6.15.
The company has demonstrated operational excellence, effectively navigating the price/cost environment, leading to improved margins. Additionally, efficiency initiatives and volume leverage contribute to profit growth in the coming years.
Crown Holdings' robust free cash flow of $1.085 billion in the last twelve months supports strategic initiatives such as share buybacks, debt reduction, and growth investments.
Given Crown Holdings' growth trajectory, there may be some alternative stocks that could provide better upside potential. Among these are Semtech Corporation, Credo Technology Group Holding Ltd, Vertiv Holdings Co, and Monolithic Power Systems, all of which offer a mix of stability and high growth potential.
Investors looking for opportunities in the finance sector might find Crown Holdings' stock attractive, considering its reasonably priced valuation. With a dividend yield similar to the S&P 500's average and a price-to-earnings ratio close to the benchmark index, Crown Holdings could be a viable option for those seeking income-generating investments.
After a positive response to its first-quarter financial results, some investors might be considering expanding their portfolio by investing in Crown Holdings. Given the company's consistent performance, strong EBITDA, and robust free cash flow, Crown Holdings could potentially deliver steady returns for those interested in long-term growth.
