Tuesday, May 17, 2011

Crown Holdings Stock Analysis

Packaging companies design and manufacture the containers and bottles for consumer goods. This packaging company is responsible for manufacturing approximately 20% of the beverage cans used globally. This packaging company is the largest producer of aerosol and food cans in the world. This packaging company is well positioned to profit off of rising growth trends in foreign markets.

Crown Holdings (CCK) is one of the largest packaging companies in the world. The company designs packages for food products, drinks, beauty supplies, and household products. Crown Holdings is a Fortune 500 company with 139 plants in 41 different countries and has been in business since 1892.

Crown Holdings booked $8.3 billion in sales last year. Half of Crown’s revenue comes from the company’s sales of beverage cans alone. Crown is projected to earn $8.57 billion for the current year and $9.12 billion dollars in 2012. This would represent an increase in sales of 4% with the 5 year projected growth rate at 9.4%.

Crown will likely exceed these projections as the company has a history of guiding down to lower Wall Street expectations.

Crown Holdings has done an excellent job of generating cash with over $615 million in free cash flow this year. Operating margins are high at over 10.4%. Management has done a solid job of becoming leaner by decreasing costs. Crown has lowered its interest expense from $61 million to $47 million dollars by paying off outstanding debt and lowering its borrowing costs. The net effect has been an increase in profitability over the last two years with Crown Holdings.

Crown currently trades a 14 times this year’s earnings and 12.5 times next year’s estimates. That’s right in line with the industry average. The stock is not cheap at $40 a share but would be attractive in the mid $30’s.
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