Tuesday, Baird raised its rating on Crown Holdings (NYSE:CCK) from Neutral to Outperform, while also increasing the price target to $90 from $85. The adjustment comes as the firm recognizes the stock's significant underperformance year-to-date.
Crown Holdings, a player in the Packaging (NYSE:PKG) and Coatings sector, is now seen as trading at a valuation spread that is considered unsustainable when compared to its closest peers.
The upgrade is part of Baird's first-quarter 2024 preview for the Packaging and Coatings industry. The firm's positive stance on Crown Holdings is influenced by the company's proactive adjustments to the changing operating environment.
These adjustments include cost reduction initiatives and efforts to reduce debt, which are expected to be supported by an acceleration in free cash flow generation.
Baird's new price target of $90 is based on approximately 15 times the firm's 2024 earnings per share (EPS) estimate of $5.95 for Crown Holdings. The price target suggests a potential upside from the company's previous valuation, indicating Baird's confidence in the company's future performance.
Crown Holdings' strategy to navigate the current market conditions involves both operational efficiency and financial management. The company's focus on cost-outs and balance sheet deleveraging are key factors that Baird believes will drive the stock's recovery and growth.
InvestingPro Insights
As Baird shifts its perspective on Crown Holdings (NYSE:CCK), aligning with the firm's analysis, InvestingPro data further supports the notion of a promising financial outlook for the company. The market capitalization of Crown Holdings stands at a robust $9.09 billion, underpinned by a Price/Earnings (P/E) ratio of 20.01. This P/E ratio reflects a favorable valuation, especially when considering the adjusted P/E over the last twelve months as of Q4 2023, which is even lower at 17.8. This suggests that the company is potentially undervalued relative to its earnings.
Moreover, the company's commitment to shareholder returns is evident with its dividend yield at 1.3%, and notably, Crown Holdings has raised its dividend for three consecutive years, showcasing a strong dividend growth of 13.64%. The InvestingPro Tips highlight that the company's valuation implies a strong free cash flow yield and analysts predict profitability for the year, which aligns with the company being profitable over the last twelve months. These factors could be the catalysts for the stock's recovery and growth, as identified by Baird.
For those seeking a more in-depth analysis, there are additional InvestingPro Tips available, which can be explored to gain further insights into Crown Holdings' financial health and future prospects. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the comprehensive array of tips that InvestingPro has to offer.
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