On Dec 6, we maintained our Neutral recommendation on
), based on expected benefits from increased capacity in
the Alagoinhas plant, the acquisition of Envases del Plata S.A.
de C.V and cost cutting measures. However, loss of customers,
continued weak demand for 12 ounce cans, and impact of government
spending cuts on the Aerospace and Technologies segment remain
concerns for this manufacturer of metal and plastic packaging for
beverages and foods.
Ball Corporation's third-quarter 2013 adjusted earnings of $1.00
per share increased 11% year over year, led by
better-than-expected global beverage can volumes and an improved
seasonal vegetable harvest. However, total revenue in the third
quarter remained flat year on year at $2.28 billion.
The Brazilian can market grew approximately 10% in 2012, and
demand is expected to continue to increase. In Brazil, Ball's
joint venture metal beverage can plant in Alagoinhas, which began
production earlier in 2012, completed installation of a second
can line that is capable of manufacturing multiple can sizes.
This increased capacity will help the company to capitalize on
the increased demand, spurred by the upcoming soccer World Cup in
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.
In November, Ball Corporation announced the closure of steel
aerosol packaging manufacturing plant in Danville, Ill. Earlier
in February, the company announced that it will close its Elgin,
Ill., food and household products packaging facility in Dec 2013.
These closures are consistent with the company's strategy to
maintain an efficient manufacturing footprint and reduce costs.
Ball has also initiated cost cutting measures in Europe, the
benefits of which are expected to be realized in 2014 and 2015.
On the flipside, late in the second quarter of 2012, Ball was
notified by a customer about its intent to source beverage cans
from an alternative supplier, effective Jan 1, 2013. Furthermore,
in the first quarter of 2013, Ball was notified by a food can
customer about its decision to shift to a new supplier, effective
2015. This loss of customers will weigh on Ball's results as well
as dampen investor sentiment.
Ball Corporation's Americas & Asia beverage results in the
first nine months of 2013 were negatively affected by continued
weak demand for 12 ounce cans in North America. In response to a
slowing demand, Ball Corporation ceased production at its plants
in Milwaukee, Wisconsin, Columbus, Ohio, and Gainesville,
Ball Corporation's Aerospace and Technologies segment's sales
declined 1% in the third quarter as a result of the government
shutdown and sequestration. This compared unfavourably to the 15%
and 8% increase in the first and second quarters of 2013. Ball
indicated that some projects have been put on hold or decision
making is slow following government spending cuts. This will
remain a headwind for the segment. Henceforth, the company should
reduce its dependency on the U.S. government funding.
Other Stocks to Consider
Ball Corporation retains a short-term Zacks Rank #3 (Hold). Some
better-ranked stocks in the same sector include
Sealed Air Corp.
Packaging Corporation of America
UFP Technologies, Inc.
). All these stocks hold a Zacks Rank #2 (Buy).
BALL CORP (BLL): Free Stock Analysis Report
PACKAGING CORP (PKG): Free Stock Analysis
SEALED AIR CORP (SEE): Free Stock Analysis
UFP TECH INC (UFPT): Free Stock Analysis
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