On Apr 11, 2014, we issued an updated research report on
). This manufacturer of metal and plastic packaging for beverages
and foods reported a 34% year-over-year improvement in its
fourth-quarter 2013 adjusted earnings per share to 86 cents. The
company has maintained its long-term earnings per share growth
goal of 10-15%.
Ball Corporation will continue to benefit from expansion in
developing regions such as Brazil. Brazilian beer production
increased substantially in February and March mainly due to hot
weather as well as the annual Carnival which is likely to cause
an uptrend in first-quarter results. Furthermore, Ball
Corporation's joint venture metal beverage can plant in
Alagoinhas completed installation of a second can line that will
manufacture multiple can sizes. This increased capacity will help
the company to capitalize on the increased demand spurred by the
upcoming soccer World Cup in Brazil.
In December, Ball acquired Envases del Plata S.A. de C.V., a
leading producer of extruded aluminium aerosol packaging in
Mexico. Demand for extruded aluminum packaging for personal care
products continues to increase, thus providing new opportunities
for Ball's growing business. The company continues to generate
solid cash flow and reward its shareholders through share
repurchases and dividends. Further, share repurchase will support
Ball Corporation's earnings.
Margins in Europe turned positive in the fourth quarter,
reversing the margin compression it started seeing in 2011,
attributed to the company's cost reduction initiatives. Ball
Corporation expects volumes in Europe to be up 3% in 2014 and
affirms its target to restore margins closer to 11-12% by 2015.
The cost savings from restructuring should drive margins higher
However, since the announcement of fourth-quarter results, the
LME (London Metal Exchange) aluminum premium in Europe has
remained historically high. Ball Corporation does not have
pass-through arrangements in the region and therefore,
first-quarter results will likely be affected.
Ball Corporation faced one client drop out in Jan 2013 and has
been notified of another, effective 2015. This loss of customers
will weigh on the company's results as well as dampen investor
Ball Corporation's Aerospace and Technologies segment's sales
declined 1% in the third quarter and 9% in the fourth quarter.
Ball indicated that some projects have been put on hold or
decision making is slow following the government spending cuts.
This will remain a headwind for the segment. We believe the
company should reduce its dependency on the U.S. government
Ball Corporation currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked stocks worth considering at the moment include
Packaging Corporation of America
Crown Holdings Inc.
). While Packaging Corporation of America sports a Zacks Rank #1
(Strong Buy), Crown Holdings and Kimberly-Clark carry a Zacks
Rank #2 (Buy).
BALL CORP (BLL): Free Stock Analysis Report
CROWN HLDGS INC (CCK): Free Stock Analysis
KIMBERLY CLARK (KMB): Free Stock Analysis
PACKAGING CORP (PKG): Free Stock Analysis
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