On Oct 3, Zacks Investment Research downgraded
Crown Holdings, Inc.
) to a Zacks Rank #5 (Strong Sell)
Why the Downgrade?
Both share prices and earnings estimates have undergone sharp
downward revisions following its announcement of third quarter
fiscal 2013 guidance on Sep 24. Since that date, shares of the
packaging company have fallen 4%.
Crown Holdings reduced its earnings per share guidance to a range
of $1.05 to $1.10, citing weaker-than-expected demand in European
food cans and North American beverage can markets. Crown Holdings
had earlier guided earnings in the range of $1.15 to $1.25 a
share. Compared to the prior-year quarter's earnings of $1.00,
the updated guidance represents growth of 5% to 10%.
Crown Holdings has decided to cut around 300 jobs or
approximately 3% of its workforce in its European operations,
which is expected to generate annual cost savings of
approximately $25 million. In this connection, Crown Holdings
will record a pre-tax restructuring charge of approximately $32
million or $29 million after tax with a per share effect of 21
cents in the third quarter.
Both the North American beverage can and the European food
markets being mature markets have been witnessing declining
volumes in recent years due to lower consumer spending. In mature
markets, the company needs to continuously strive to improve its
operations through disciplined pricing, cost control and careful
capital allocation. The company needs to monitor capacity, and
wherever necessary, shut down plants or reduce headcount to cut
down costs to remain profitable.
Crown Holdings is scheduled to release its third quarter earnings
results after the closing bell on Oct 16, 2013. Given the tepid
outlook, the Zacks Consensus Estimate for fiscal 2013 has
declined 2% to $3.10 a share in the past 7 days, while that for
fiscal 2014 went down 1% over the same timeframe to $3.57.
Other Stocks to Consider
Not all stocks are performing as poorly as Crown Holdings. Stocks
worth considering include
Sonoco Products Co.
KapStone Paper and Packaging Corporation
Orchids Paper Products Company
), all carrying a Zacks Rank #2 (Buy)
CROWN HLDGS INC (CCK): Free Stock Analysis
KAPSTONE PAPER (KS): Free Stock Analysis
SONOCO PRODUCTS (SON): Free Stock Analysis
ORCHIDS PAPER (TIS): Free Stock Analysis
To read this article on Zacks.com click here.