Heineken Sale of Mexico Packaging Unit to Crown Goes Down Smoothly

AMSTERDAM -- Dutch brewer Heineken says it has sold Empaque, its packaging business in Mexico, to Crown Holdings (CCK) of the U.S. for $1.23 billion (940 million euros) to reduce debt.

Heineken acquired the business in 2010 as part of a $7.9 billion deal to buy the Mexican company Femsa, which owned the Dos Equis, Tecate and Sol brands. But Heineken said Monday it doesn't view the production of cans, corks and bottles as part of its core business: brewing and marketing its beer.

Philadelphia-based Crown said the deal will make it the second-largest beer and soft drink can producer in the United States and the maker of 20% of all cans globally. In 2013, Empaque had sales of $660 million, operating profit of around $95 million and 1,500 employees.

Now let's look at TheStreet Ratings' take on some of these stocks.

TheStreet Ratings team rates CROWN HOLDINGS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CROWN HOLDINGS INC (CCK) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations, revenue growth and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:
  • Compared to other companies in the Containers & Packaging industry and the overall market, CROWN HOLDINGS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 108.83% to $378.00 million when compared to the same quarter last year. In addition, CROWN HOLDINGS INC has also vastly surpassed the industry average cash flow growth rate of 16.85%.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 8.8%. Since the same quarter one year prior, revenues slightly increased by 7.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • CROWN HOLDINGS INC's earnings per share declined by 18.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, CROWN HOLDINGS INC reported lower earnings of $2.30 versus $3.75 in the prior year. This year, the market expects an improvement in earnings ($3.35 versus $2.30).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
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