On Jun 3, we downgraded our recommendation on
), manufacturer of metal and plastic packaging for beverages and
foods, from Neutral to Underperform. This was based on continued
challenges for the company - weakness in Europe, pricing pressure
in China, loss of market share and the impact of sequestration on
the Aerospace and Technologies segment.
Ball Corporation's first-quarter 2013 adjusted earnings declined
8% year over year to 58 per share. Total revenue remained flat at
$2 billion due to lower volume.
In Europe, soft beverage can volumes, higher costs and
operational setbacks related to its regional office move and
higher input costs affected Ball in the quarter. Continued macro
weakness in Europe will continue to weigh on Ball's European
business over the next year. Furthermore, the company continues
to face pricing pressure in China given excess capacity in the
In the second quarter of 2012, Ball was notified by a customer
about its intent to source 12-ounce beverage cans from an
alternative supplier, effective Jan 1, 2013. Again in the
first quarter of 2013, Ball was notified by a food can customer
of their decision to shift buying from Ball to a new supplier
effective 2015. This loss of share will weigh on Ball's results
as well as on investor sentiment.
Primary customers for the products and services provided by the
Aerospace and Technologies segment are the U.S. government
agencies or their principal contractors. The segment showed some
weakness during the quarter as a result of sequestration. The
implementation of sequestration in the U.S. federal government
has impacted the timing of projects.
Given the weak first quarter results and a slow start to volumes
in the second quarter, Ball stated that the company will be
unable to achieve its long-term target of 10% to 15% diluted
earnings per share growth in 2013.
Other Stocks To Consider
Other stocks in the containers industry that are currently
performing well and have a good visibility include B
erry Plastics Group, Inc.
Bemis Company, Inc.
UFP Technologies, Inc.
), all carrying a Zacks Rank #2 (Buy).
BERRY PLASTICS (BERY): Free Stock Analysis
BALL CORP (BLL): Free Stock Analysis Report
BEMIS (BMS): Free Stock Analysis Report
UFP TECH INC (UFPT): Free Stock Analysis
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