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070201 Deutsche Bank Report - CCK's 4Q in 100 Words
Deutsche Bank - Equity Research
Crown Holdings {Ticker: CCK.N, Recommendation: Buy}.
OK quarter. Looks like EPS of $0.16/share ex specials, DB
@ $0.16 & FC @ $0.52. Rev's + 6.4% y/y. Issues:
metal-cost pass-thru's in Europe & mixed performance in food
cans. Cashflow fell short of targets for ‘06
Q4 vol's appears a bit soft, mixed by region &
business. NA Food= up mid-single digits y/y, Euro food=flat,
Euro bev vols were weak, Americas bev down mid-single digits, Asia
& Middle East remain strong & have significant new capacity
hitting mkt in ‘07.
Price? Key issue = restoration of margins in Europe (FY06'
beverage -410bps, food -150bps). CCK reports 2 encouraging
(“very happy”) settlements in Q4, suggesting that tight
European supply/demand balance has helped w/ '07 pricing.
Others: (1) '07E FCF = $330-$370MM. (2) ‘07E
EBIT growth = 12.5%: improving margins & new capacity,
(3) '07 capex target @ $140- $150MM, '06 = $191MM (4) remaining NA
plastics divested in Q4 (5) $125MM in RE sales, $87MM in Q4, $38MM
in '08, (6) '06 effective tax rate =20%, '07 rate will be 26%. (7)
Several new lines ramping-up in US, across Middle East, Vietnam
& Cambodia.
Where's it trading? '06 EV/EBITDA=9.2X, ‘07
EV/EBITDA=8.3X
Change in view? Not really. We like the stock
(a) margin improvement potential (b) free cash flow yield in '07
looks like 10%. Maintain Buy rating and '07 estimate at
$1.35/share and introducing '08 at $1.50/share.
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