Balanced View on Ball Corporation - Analyst Blog
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 in 2014.
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 sentiment.
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 funding.
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 ( PKG ), Crown Holdings Inc. ( CCK ) and Kimberly-Clark Corporation ( KMB ). 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 Report
KIMBERLY CLARK (KMB): Free Stock Analysis Report
PACKAGING CORP (PKG): Free Stock Analysis Report
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