2-for1 Sale
CCL Industries Inc. (TSX:CCL.B), a world leader in specialty label, security, and packaging solutions, announced its fiscal 2017 fourth-quarter and full-year earnings results and a dividend increase this morning, and its stock has responded by soaring over 7% at the open of trading. Let’s break down the earnings release to determine if the stock could continue higher from here and if we should be long-term buyers today.
The results that ignited the rally
Here’s a quick breakdown of six of the most notable statistics from CCL’s three-month period ended December 31, 2017, compared with the same period in 2016:
| Metric | Q4 2017 | Q4 2016 | Change |
| Total sales | $1,234.5 million | $1,058.4 million | 16.6% |
| Gross profit | $383.0 million | $322.6 million | 18.7% |
| Earnings before interest, taxes, depreciation, and amortization (EBITDA) | $259.0 million | $204.3 million | 26.8% |
| Net earnings | $169.4 million | $98.3 million | 72.3% |
| Adjusted basic earnings per Class B share (EPS) | $0.83 | $0.59 | 40.7% |
| Cash provided by operating activities | $286.3 million | $254.1 million | 12.7% |
And here’s a quick breakdown of six notable statistics from CCL’s 12-month period ended December 31, 2017, compared with the same period in 2016:
| Metric | Fiscal 2017 | Fiscal 2016 | Change |
| Total sales | $4,755.7 million | $3,974.7 million | 19.6% |
| Gross profit | $1,436.3 million | $1,167.9 million | 23% |
| EBITDA | $959.2 million | $792.7 million | 21% |
| Net earnings | $474.1 million | $346.3 million | 36.9% |
| Adjusted EPS | $2.69 | $2.28 | 18% |
| Cash provided by operating activities | $711.2 million | $564.0 million | 26.1% |
Putting a smile on shareholders’ faces
In the press release, CCL also announced a 13% increase to its quarterly dividend $0.13 per share, and the first payment at the increased rate will come on March 30 to shareholders of record at the close of business on March 16.
Is now the time to buy?
It was a phenomenal quarter and year for CCL, highlighted by record earnings in both periods, and the dividend hike added to the positive sentiment, so I think the +7% pop in its stock is warranted; furthermore, I would still buy the stock today for two fundamental reasons.
First, it still trades at attractive valuations. CCL’s stock currently trades at just 23 times fiscal 2017’s adjusted EPS of $2.69 and only 21.7 times the consensus EPS estimate of $2.85 for fiscal 2018, both of which are inexpensive compared with its five-year average multiple of 25.7; these multiples are also inexpensive given the double-digit percentage earnings-growth rate it achieve in 2017 and its long-term growth potential.
Second, it’s a dividend-growth superstar. CCL now pays an annual dividend of $0.52 per share, which brings its yield up to about 0.8%. A 0.8% yield is far from high, but it’s crucial to note that the dividend increase it just announced has it on track for 2018 to mark the 16th consecutive year in which it has raised its annual dividend payment, making it one of the best dividend-growth stocks in the market today.
Including reinvested dividends, CCL’s stock has now returned more than 120% since I first recommended it on June 24, 2015, and I still think it’s a great buy today, so take a closer look and consider beginning to scale in to long-term positions over the next couple of weeks.
