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080417 Deutsche Bank Report - CCK's 1Q in 100 Words

Deutsche Bank - Equity Research

Crown Holdings {Ticker: CCK, Closing Price: USD 27.48, Target Price: USD 35.00, Recommendation: Buy}.

* Strong 1Q results.

EPS = $0.17. Net of a $0.01 ch'g, looks like $0.18. DB @ $0.13, FC @ $0.14. Comps: 4Q07 = $0.12, 1Q07 = $0.10.

Sales +8.8% y/y, mostly driven by FX, which provided 6.4 ppts of the gain. Margins improved also. GM (after dep.) improved to 13.7% from 12.6% in 1Q07.

* But no change to '08 outlook. Still looking for $330-370MM in '08 FCF. Why so cautious after strong 1Q? (1) EBIT growth projection improves only from 16% to 16-20%, because (a) y/y FX benefits will diminish in coming quarters unless US$ weakens even more and (b) 1Q07 was an easy comp in Euro Bev because of unusually cold weather, and (2) the incremental EBIT gain will be offset by slight growth in int. exp. and capex, both driven by FX.

* Americas Bev. Rev's +6.1%, margins up. EBIT = $42MM, 4Q07 = $34MM, 1Q07 = $37MM. Vol' +1.3% y/y, with strong LatAm growth.

* NA Food. Rev's -3.1%. EBIT = $11MM, 4Q07 = $16MM, 1Q07 = $10MM. Improved operational efficiencies mitigated softer volumes.

* Euro Bev. Strong. Rev's +23.8%. EBIT = $51MM, 4Q07 = $37MM, 1Q07 = $30MM. Vol' +15.4% y/y (incl. +38% in Middle East due to weather- related weak comp).

* Euro Food. Rev's +9.4%. EBIT = $41MM, 4Q07 = $35MM, 4Q06 = $28MM. Vol' -5% y/y. Pricing & FX drove EBIT growth.

* Specialty Pkg. Rev's +8.2%. EBIT = $1MM, 4Q07 = ($4MM), 1Q07 = $1MM.

* '08 Guidance: (1) Segment EBIT = $750-$780MM, (2) tax rate = 29%, (3) capex = $170MM, (4) int. exp. = $295MM.

* Change in view? Not really. Still positive, based on FCF generation and non-US exposure (74% of sales). However, lack of change to '08 FCF outlooks shows that 1Q strength was mostly driven by FX. Hence 1Q does little to make us more positive than we already were. Adjusting 2Q EPS est. from $0.53 to $0.55. No change to '08 annual estimate.