美国包装行业2020年展望：稳健增长和有吸引力估值
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Packaging 2020 Outlook - Solid, Defensive Growth and Attractive Valuations; Transactions a Potential Catalyst North America Equity Research 18 December 2019
The packaging stocks have performed well in 2019, with the 27% gain in our coverage universe matching the S&P’s 27% gain.
Looking into 2020, we expect the packagers to see solid earnings and FCF growth, with volumes starting to pick up and remaining solid especially for the beverage can companies. Despite this solid outlook, the packaging stocks are trading at a discount to their historic averages on our 2020 estimates. We also think acquisitions and divestitures could be catalysts for the sector, with CCK, OI and SLGN
potentially seeing the greatest impact. BERY, BLL and
CCK remain our top picks. We think BERY"s discount to the group should narrow as it delivers on its FCF targets, sees volumes pick up in HH&S and EM and continues to pay down debt. We think both BLL’s and CCK"s stock prices should continue
to benefit from improved beverage can volume growth rates (which we believe are sustainable), while we think CCK"s portfolio review has the potential to unlock further value through divestitures and more substantial returns to shareholders. Expecting solid earnings and FCF growth in 2020. We are forecasting EBIT and EPS growth in the high-single digit range, with the growth coming roughly equally from volume gains (after volumes were about flat over the past two years), a positive price/cost spread and acquisitions. FCF growth should be solid as well, and driven mostly by higher earnings and in some cases lower restructuring expenses. Valuation remains attractive. The packaging stocks are trading at a 2020E EV/EBITDA multiple of 8.6x and a FCF yield of 7.8%, compared to respective averages for the group over the past three years of 9.3x and 7.0%. We think these multiples are attractive given the healthy growth we are forecasting for the
group and the defensive nature of their businesses. Acquisitions and divestitures likely. We think CCK, OI, and SLGN could potentially see the greatest impact from transactions given the scope of their interests. CCK has launched a portfolio review, and we think its European Food and Non-reportable segments are the most likely candidates for divestiture with Transit also a possibility. OI is looking at non-core asset divestitures but has included its Australia & New Zealand operations in its review. SLGN has stated that acquisitions remain its preferred use of capital, and we think the most likely area for deals would be within closures and dispensing systems. Packaging Tyler J. Langton AC
(1-212) 622-5234 tyler.j.langton@jpmorgan.com Bloomberg JPMA LANGTON <GO> J.P. Morgan Securities LLC
Equity Ratings and Price Targets
Company
Ticker
Mkt Cap ($ mn)
Price ($)
RatiCur ng
Prev
Cur Price TarEnd Date get Prev
End Date Ardagh Group ARD US 4,652.75
19.69
UW n/c 19.00
Dec-20 18.00
n/c Ball Corporation BLL US 21,929.68
64.19
OW n/c 78.00
Dec-20 n/c n/c Berry Global BERY US 6,267.19
46.84
OW n/c 59.00
Dec-20 n/c n/c Crown Holdings CCK US 9,771.35
72.50
OW n/c 84.00
Dec-20 n/c n/c Myers Industries MYE US 615.74
17.25
N
n/c 19.00
Dec-20 n/c n/c Owens-Illinois OI US 1,780.64
11.38
N
n/c 12.00
Dec-20 n/c n/c Sealed Air SEE US 6,048.94
38.95
N
n/c 44.00
Dec-20 n/c n/c Silgan SLGN US 3,409.73
30.58
N
n/c 33.00
Dec-20 n/c n/c Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 17 Dec 19.
See page 51 for analyst certification and important disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.jpmorganmarkets.com
Table of Contents Solid Earnings & Free Cash Flow Outlook .............................3 Volume Growth Should Pick Up ..............................................3 Valuation Remains Attractive ..................................................9 4Q19 Earnings Preview – Earnings Should See some Pressure ....................................................................................9 Ardagh Group .........................................................................11 Ball Corporation .....................................................................15 Berry Global ............................................................................19 Crown Holdings ......................................................................23 Myers Industries .....................................................................28 Owens-Illinois .........................................................................31 Sealed Air ................................................................................35 Silgan .......................................................................................39
Solid Earnings & Free Cash Flow Outlook Looking at out into 2020, we expect the packaging companies to generate solid earnings and FCF growth. We are forecasting EBIT and EPS growth in the high- single digit range, with the growth coming roughly equally from volume gains, a positive price/cost spread and acquisitions. FCF growth should be solid as well, and driven mostly by higher earnings and in some cases lower restructuring expenses. We do expect volume growth to pick up next year after more flattish growth in 2018 and 2019E, and have outlined our expectations by product and region in the section below.
Figure 1: 2019-2021E EPS and FCF Growth Estimates y/y % change
Y/2019E Y EPS Growth 2020E
2021E Y/Y FCF 2019E Growth 2020E
2021E ARD 0%
-12% 14%
25%
1%
8%
BLL 15%
24%
16%
21%
19%
8%
BERY 2%
18%
21%
24%
3%
14%
CCK -3%
11%
9%
13%
-6%
17%
MYE -1%
13%
4%
-19% 1%
3%
OI -19% 0%
2%
NM NM 79%
SEE 11%
9%
5%
-31% 82%
33%
SLGN 4%
7%
3%
-11% 5%
4%
Avg. 1%
9%
9%
3%
15%
21%
Source: Company reports and J.P. Morgan estimates.
Figure 2: Revenue and EBIT Growth % y/y 2018
2019E 2020E 2021E Revenue Growth 9.8%
1.4%
4.8%
2.2%
Volume/mix 0.3%
-0.1% 1.9%
2.0%
Price/pass-throughs 2.9%
-0.1% 0.2%
0.2%
Acquisitions 5.1%
3.2%
2.8%
0.0%
Fx 0.9%
-1.5% -0.2% 0.0%
EBIT % 13.8%
13.9%
14.5%
14.8%
EBIT Growth 6.2%
2.3%
9.0%
4.4%
Volume/mix 0.4%
0.4%
2.3%
2.5%
Net price/cost spread -0.4% -0.1% 3.3%
1.9%
Acquisitions 5.4%
3.9%
3.6%
0.0%
Fx 0.7%
-1.9% -0.2% 0.0%
Source: Company reports and J.P. Morgan estimates.
Volume Growth Should Pick Up As shown above in Figure 2, we expect volume growth to pick up in 2020. Most of this growth should be driven by solid volume growth for beverage cans and the benefits from easier comps.
Beverage cans Figure 3: Beverage Can Volumes y/y growth
Beverage cans
U.S. 1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
Avg. ARD n/a n/a n/a n/a n/a n/a n/a n/a 8%
4%
4%
8%
4%
2%
7%
5% BLL 3%
4%
1%
1%
4%
2%
0%
0%
-4%
-3%
2%
4%
6%
4%
3%
2% CCK 4%
4%
4%
4%
1%
-3%
-2%
0%
4%
4%
4%
4%
0%
1%
0%
2% Industry 2%
1%
2%
1%
-1%
0%
-2%
-1%
0%
-1%
1%
3%
3%
2%
3%
1% Europe 1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
ARD n/a n/a n/a n/a n/a n/a n/a n/a 3%
0%
2%
4%
10%
1%
3%
3% BLL -2%
2%
0%
1%
3%
1%
3%
3%
6%
6%
10%
10%
10%
7%
4%
4% CCK 10%
2%
-1%
-2%
4%
7%
6%
8%
0%
-1%
3%
0%
5%
3%
6%
3% Industry 3%
2%
0%
1%
3%
3%
3%
4%
2%
4%
5%
5%
8%
4%
4%
3% Brazil 1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
ARD n/a n/a n/a n/a n/a n/a n/a n/a 12%
12%
7%
4%
5%
14%
15%
10% BLL 2%
3%
0%
-12% 3%
2%
5%
8%
6%
5%
-3%
0%
11%
12%
5%
3% CCK -6%
5%
5%
-1%
5%
8%
6%
13%
4%
9%
6%
5%
8%
6%
-5%
5% Industry -6%
6%
2%
-8%
3%
8%
5%
5%
9%
9%
8%
6%
8%
12%
5%
5% Source: Company reports and J.P. Morgan estimates. Estimates for BLL’s volumes in Brazil are for its entire South America segment.
United States – Strong growth in both alcoholic and non-alcoholic continues Over the past year, beverage can volumes in the U.S. have been growing in the 3.0% y/y range, a meaningful step up from the 1% y/y increase seen over the past several years. This step up, in our view, has been due to improved growth of products already in cans as well as new beverage products increasingly being launched in cans instead of other substrates such as glass and PET.
For 2020, we would expect industry volumes to be up in the 3% range, with both BLL and CCK growing slightly faster than the industry and ARD potentially slightly below. In 2020, BLL should benefit from improved efficiencies at Goodyear, new can lines in its Rome, GA and Fort Worth, TX facilities as well as additional line speed ups and conversions. BLL is also constructing a new, two-line facility in Glendale, AZ set to come online in early 2021 and exploring a new facility in the U.S. Northeast that we think will likely be finalized in the near term, with both facilities supporting growth in 2021. Crown is currently constructing a new, third high-speed line at its Nichols facility that will begin production in 2Q20 and is also converting an existing two-piece steel food can line at its Weston, Ontario plant to produce aluminum beverage cans starting in 1Q20. These two new lines should drive about 9% volume growth, with about half of the new capacity benefitting 2020 and the rest 2021 given the timing of the start-ups. ARD has not specifically announced any new plants or lines, but we think they are focused on speeding up lines to drive higher growth. Metal Container Corp. (the beverage can packaging assets of ABI in the U.S.) and Rocky Mountain Metal Container Corp. (a 50/50 JV between Ball and Molson Coors that manufactures beverage cans and ends in Golden, CO) should likely trail the industry in volume growth given their above average exposure to the mega beer market.
Europe – sustainability helping to pu...