A low valuation, hefty cash flows, and big-name customers could make this stock bubble over. By Todd Chanko

When William Painter invented the metal bottle cap in 1892 and founded Crown Cork & Seal Company -- now known as Crown Holdings -- he ushered in what is now a $66 billion industry. By an uncanny coincidence, Coca-Cola was incorporated that same year.

Today, Crown Holdings serves not only the canned beverage sector but also industries as diverse as vegetables, face creams, and aerosol sprays. If you receive a tin of Danish cookies or panettone this holiday season, the festive container was likely manufactured and embossed by Crown.

The company even ensures that its range of products -- and those of other industries -- arrive at their destinations damage-free through its Transit Packaging segment, which contributed 18% of its $11.8 billion 2024 sales. Heineken, Coca-Cola, WD-40, and even Barbasol are household names that rely on the company to manufacture packaging for their products.

For investors, Crown offers a refreshing alternative to artificial intelligence, rare earth, technology, or defense/aerospace stocks. Its 12-month forward price earnings ratio of 12.1 is half what it was as recently as last year, as tech stocks stole the show. And this is despite a free cash flow yield of 11.4% and third-quarter earnings per share growth of 13% year over year.

Even more enticing than a cold High Noon Hard Seltzer on a hot August night (yes, in a can also manufactured by Crown), the company continues to repurchase its own stock, having bought $314 million worth of shares through the third quarter. "When combined with dividends, we've returned more than $400 million to shareholders this year," Kevin Clothier, the company's chief financial officer, said on Crown's third-quarter conference call last month. That adds up to nearly $3.47 a share for the first nine months of 2025 -- about a 3.7% yield.

Management has consistently guided conservatively, underestimating 63% of the past 10 years' reported earnings. This makes its upward revisions last month noteworthy. Crown raised 2025 full-year earnings guidance by 12%, to $7.75 per share, and free cash flow by 25%, to $1 billion.

Crown also provided transparency on the U.S. tariffs that are haunting companies in nearly every sector. Clothier cites the "tariff-weary Mexican consumer" as one of the factors contributing to a "15% volume decline across Brazil and Mexico." One of the coldest Brazilian winters in 20 years didn't help either: Heineken blamed lower temperatures in Southern Brazil for a decline in consumption.

Crown's operations in Europe can help mute the effects of tariffs. Contributing a 27% increase in income from a 12% increase in shipments during the third quarter, its European segment saw broad-based activity across regions, particularly in the Mediterranean during the summer tourist season. A crop of new brands in the Gulf states is also driving growth.

True to temperament, management reminded Wall Street analysts that a growth rate of 12% in its European markets isn't sustainable, though it reassured them that a compound annual growth of 4% to 5% is. Crown's European business should continue to grow in volume and income, driven by the solid cash flows generated by the can business, ample capacity, and expanding demand for canned beverages and other products.

Moreover, despite "the pinch of higher tariffs" felt by consumers and businesses in Asia, that region still delivered margins above 17% on earnings before interest, taxes, depreciation, and amortization, or Ebitda, despite a year-over-year dip of 3% in Southeast Asian volumes. Imagine how robust the business could be without a tariff overhang.

However responsive Crown has been to myriad challenges throughout its 130-year-plus history -- two world wars, the Great Depression, changing tastes, and heightened sensitivity to environmental concerns -- it could yet encounter more intractable headwinds. Its global footprint, spanning 189 facilities across 39 countries, is both an advantage and Achilles' heel, with plants in Myanmar, India, China, Turkey, and Tunisia particularly susceptible to political upheaval.

Climate change may also present ever-growing problems, with weather anomalies not only weighing on consumer activity -- to wit, Heineken's aforementioned chilly experience in Brazil -- but also potentially disrupting manufacturing and shipping. Additionally, aluminum, the core raw material of Crown's business, is exposed to tariff, climate, and regulatory risks.

Crown's balance sheet is less leveraged than its peers, at about 2.5 times net debt to Ebitda compared with 3.4 times for Silgan Holdings and 2.8 times for Ball Corp. Crown's stock is also outperforming these peers, up 17.5% this year compared with declines of 26% and 15% for Silgan and Ball, respectively.

Using a discounted cash flow approach for valuation, we arrive at a 12-month target price of $125. If Crown's overseas markets continue to thrive, the stock could win an expanded P/E multiple of 16. That would put the stock at $128, based on projected 2026 earnings of $8.02 -- 3.5% above management's 2025 earnings estimate. Blending these two approaches, the company could reach $126 within a year -- or 30% above its recent price.

That's a lot of six-packs of your beverage of choice.

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November 07, 2025 21:31 ET (02:31 GMT)

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