Why CCL Industries Shares Surged

Is this meaningful? Or just another movement?

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Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of specialty packaging company CCL Industries (TSX: CCL-B) popped 10% today after its quarterly results topped Bay Street’s expectations.

So what: The stock has rallied nicely over the past year on a string of better-than-expected quarters, and today’s Q3 results — earnings increased 10.8% on organic revenue growth of 3.3% — only reinforce that positive trend. Additionally, CCL’s total sales spiked 92% to $606.6 million fueled by its recent acquisitions of Avery Dennison and INT Autotechnik, giving analysts plenty of good vibes over its scale going forward.

Now what: Management remains cautiously optimistic about the near-term. “Surpassing the strong fourth quarter 2012 results on an organic basis could prove challenging but acquisitions will augment performance after adjusting for one-time events,” said President and CEO Geoffrey Martin. “We expect low single digit organic growth rates in developed economies with stronger demand in emerging markets and automotive. Currency translation would positively impact results at today’s Canadian dollar exchange rates.” Of course, with CCL shares now up about 120% from its 52-week lows and trading at a forward P/E around 20, I’d wait for a wider margin of safety before buying into that bullishness.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Brian Pacampara does not own shares of any companies mentioned.  The Motley Fool has no positions in the stocks mentioned above at this time.

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