Rexam PLC (ADR) (REXMY): Can Profits Be Canned From a Mediocre Guidance?

PepsiCo, Inc. (NYSE:PEP), playing catch-up to Coke in the emerging markets, has upped its ad spend via such high-profile campaigns as “Live for Now.” The company is likewise sponsoring major sports events as part of its marketing strategy in developing markets

Fundamental strengths

It is important to note that beverage manufacturers rarely shift can suppliers with their supply contracts bound by long-term deals. The big global can manufacturers likewise tend to avoid each other geographically to avert price wars detrimental to their profit margins.

Smart can packaging, a product of Rexam’s culture in innovation, is another source of strength for the company not only in the emerging markets but also in the developed territories as well. In South America, the beverage firm New Age has tapped Rexam for the development of a can with thermochromic ink. The can’s innovative ink turns green, red, or blue in a unique artwork indicating the optimum drinking temperature for the beverage. For the Peruvian beer Cusqueña brewed by Backus, Rexam has likewise developed a stylish can sporting a “wet look” through an innovative combination of ink and varnish.

Thirst-quenching takeaway

Rexam PLC (ADR) (OTCMKTS:REXMY)’s current valuation of nearly 4% below its 52-week high of $41.97 looks like an excellent opportunity for a position in this equity which has a consensus one-year target price of $47.94. Although the company may have fallen short of its 9% year on year earnings growth in its most recent quarter, Rexam has a robust strategy to maximize shareholder value for the long-term through its sole focus on beverage can manufacturing. Having taken assertive actions on costs to lessen the impact of lower than anticipated volumes, the company likewise realized a trailing 12-month operating margin of 11.11%, the highest among the major global players in the beverage can manufacturing industry.

The article Can Profits Be Canned From a Mediocre Guidance? originally appeared on Fool.com and is written by Arturo Cuevas.

Arturo Cuevas has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and PepsiCo (NYSE:PEP). The Motley Fool owns shares of PepsiCo. Arturo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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