Can manufacturing stocks slide on looming competition reports (NYSE: CCK)
On Wednesday, rumors that the Malaysian canning giant is coming to North America are impacting can manufacturing stocks.
According to a new report from The Canmaker, Can-One International is opening a major facility in New Hampshire through its Kian Subsidiary Joo. The subsidiary will open a 23,000 square foot facility to supply “hundreds of millions” of cans to packaging and logistics company G3 Enterprises, which will in turn supply cans to small beverage companies.
The report rattled shares of domestic can makers like Crown Holdings (NYSE: CCK -2.9%)Ball Company (NYSE: BALL -1.9%)and Ardagh Metal Packaging Group (New York Stock Exchange: AMBP -0.1%).
However, the sign of a more congested industry should not scare off investors in U.S. can makers according to Bank of America.
“As the industry adds significant capacity in North America over the next few years, we expect demand to absorb new can supply even with this announcement,” a team of analysts from the company wrote on Wednesday. bank. “History suggests that these announcements may provide headwinds to stocks for a period, but the relatively small scale (seemingly) of this operation and other factors suggest that the new supply is manageable.”
The analysis added that demand growth is expected to trend at 5% through 2025 and that “strong trends in energy, ready-to-drink cocktails and CSDs (carbonated drinks)” are expected to continue to support the industry as a whole despite increased competition. The relatively small capacity of the proposed new facility should not have an outsized impact on existing businesses that benefit from these trends.
The team maintained “Buy” ratings on both Crown Holdings (CCK -2.9%) and Ball Corporation (BALL -1.9%) based on their ability to compete with Kian Joo and maintain market share.
Read more about why Barclays is bullish on Ardagh Metal Packaging (AMBP).