On Nov 15, Ball Corporation BLL was downgraded to a Zacks Rank #5 (Strong Sell) due to a number of concerns, including damages caused by the U.S. hurricanes, and spike in freight and fuel rates. Demand volatility in the EMEA (Europe, Middle East and Africa) region and elevated expenses also remain headwinds.
Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of underperforming the broader market.
Also, Ball Corporation’s share price movement has not been much impressive. Over the past year, its shares have gained just 4.7% compared with 7.9% growth recorded by the industry it belongs to.
Why the Downgrade?
Ball Corporation’s third-quarter 2017 performance was adversely impacted by hurricanes, earthquakes and recent fires near the Fairfield California facility. It faced seven days of lost production due to lack of orders in two of its largest North American regions and lower cans sales. The company predicts that its fourth-quarter results will be also affected by the adverse weather conditions.
Notably, Ball Corporation witnessed significant rise in freight rates, and out-of-pattern freight across the Southern and lower Atlantic plant network after the hurricanes. The company believes freight and fuel rates will continue to flare up.
Further, its performance will be marred by political and economic unrest in Turkey and Egypt. In addition, the 50% carbonation tax in Saudi Arabia remains an issue as it has been thwarting consumer demand in the region.
Ball Corporation is also facing tight supply and demand situation in the global aluminum aerosol business. Moreover, increase in interest and additional expenses related to Recklinghausen plant closure will affect earnings.
Also, analysts have become increasingly bearish on the stock over the past 30 days, with estimates moving downward. The Zacks Consensus Estimate for 2017 earnings declined 3.5% to $1.95. In addition, the Zacks Consensus Estimate for the next year moved down 5.1% to $2.24 during the same time frame.
Ball Corporation Price and Consensus
Ball Corporation Price and Consensus | Ball Corporation Quote
Furthermore, the stock carries a VGM Score of F. We note a weak Style Score robs the stock of much of its upside potential over the next 30 days. So, if a stock carries a Style Score of D or F, it’s better to sell that stock and switch to the one with a score of A or B.
Stocks to Consider
Some better-ranked stocks in the industry are Caterpillar Inc. CAT, Terex Corporation TEX and Komatsu Ltd. KMTUY. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Caterpillar has an expected long-term earnings growth rate of 10.3%. Its shares have rallied 48.3% year to date.
Terex has an expected long-term earnings growth rate of 11.3%. Year to date, its shares have moved up 35.9%.
Komatsu has an expected long-term earnings growth rate of 16.2%. Its shares have gained 44.6% during the same time frame.
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