What happened
Shares of Crown Holdings (CCK 2.27%) were tumbling today after the packaging manufacturer said rising costs ate into profits in its third-quarter earnings report, and it slashed its guidance for the full year.
As a result, the stock was down 18.5% as of 11:53 a.m. ET on Tuesday.
So what
Crown Holdings, which makes products like aluminum and steel cans for food and beverages, posted solid top-line growth in the quarter as revenue was up 11.6% to $3.26 billion, though that was slightly below analyst estimates at $3.3 billion. Beverage-can volumes increased 6%, showing that demand for its products is strong.
But higher costs for raw materials and energy as well as foreign exchange headwinds weighed on the bottom line. Operating income fell from $348 million to $297 million, and adjusted earnings per share (EPS) slipped from $2.03 a year ago to $1.46, which missed estimates at $1.77.
CEO Timothy Donahue said: "Since our last earnings release in mid-July, the impacts from inflation, European energy prices, interest rates, and currency have become more challenging. With input costs expected to remain elevated prior to our contractual inflationary resets in 2023, and many customers adjusting their order patterns in response to lower consumer spending, we expect the operating environment and margins to remain under pressure for the balance of 2022."
Now what
Crown Holdings also cut its guidance for the full year. The company sees fourth-quarter adjusted EPS of $1 to $1.10, well below the analyst consensus at $1.77. For the full year, it cut its adjusted EPS guidance from a range of $8 to $8.20, to a range of $6.60 to $6.70. Management noted that $1 of that headwind was due to a stronger U.S. dollar, higher energy costs in Europe, and higher interest expense.
The good news for investors is that most of those challenges should be temporary, which means the industrial stock should eventually bounce back, especially as underlying demand for its products has been strong.
