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Ball Corporation (BLL) Q4 Earnings Lag, Sales Top Estimates

Zacks Equity Research

Ball Corporation BLL reported fourth-quarter 2018 adjusted earnings of 55 cents per share, lagging the Zacks Consensus Estimate of 56 cents. The reported figure also declined 8% on a year-over-year basis.

 

On a reported basis, the company posted earnings of 44 cents per share compared with 45 cents per share recorded in the prior-year quarter.

 

Total revenues inched up 2% year over year to $2,803 million in the reported quarter. The top line surpassed the Zacks Consensus Estimate of $2,677 million.

 

B all Corporation Price, Consensus and EPS Surprise

 

 

Ball Corporation Price, Consensus and EPS Surprise

Ball Corporation price-consensus-eps-surprise-chart | Ball Corporation Quote

Operational Update

Cost of sales increased 5% year over year to $2,246 million. Gross profit declined 9% year over year to $557 million. Gross margin contracted 240 basis points (bps) to 19.9%.

 

Selling, general and administrative expenses went up 9% year over year to $126 million. Adjusted operating income decreased 15% to $298 million from the year-ago quarter figure of $350 million. The company reported operating margin of 10.6%, down 210 bps year over year.

 

Segment Performance

 

The Beverage packaging’s North and Central America segment’s revenues went up 11.5% year over year to $1,113 million in the quarter under review. Operating earnings of $128 million declined 4% year over year.

 

Sales in the Beverage packaging, Europe segment came in at $624 million in the reported quarter, advancing 16% year over year. Operating earnings climbed 29% year over year to $63 million.

 

The Beverage packaging South America segment’s revenues declined 14% year over year to $472 million in the December-end quarter. Operating earnings declined to $78 million from $128 million recorded in the prior-year quarter.

 

In the Aerospace and Technologies segment, sales surged 40% year over year to $359 million. Operating earnings climbed 36% year over year to $38 million. The segment’s backlog came in at around $2.2 billion, a year-over-year improvement of 26%.

 

Fiscal 2018 Performance

 

Adjusted earnings per share for fiscal 2018 came in at $2.20, an improvement of 8% from the prior year. Earnings missed the Zacks Consensus Estimate of $2.21. Including one-time items, earnings in the fiscal stood at $1.29, up 23% year over year.

 

Fiscal 2018 revenues were at $11.6 billion, reflecting year-over-year improvement of 6%. Revenues beat the Zacks Consensus Estimate of $11.5 billion.

 

Financial Condition

 

Ball Corporation reported cash and cash equivalents of $721 million at the end of the fiscal 2018, up from $448 million held at the end of the prior year. The company generated $1,566 million of cash from operating activities during fiscal 2018, compared with $1,478 million in the last fiscal. The company’s long-term debt decreased to $6,510 million as of Dec 31, 2018, from $6,518 million as of Dec 31, 2017.

 

During the reported quarter, Ball Corporation began production at all four new facilities of its specialty beverage-can manufacturing facility in Goodyear. However, it ceased operations at the   Chatsworth, CL, and Longview, TX, beverage-can facilities.

 

The company expects to benefit from outstanding requests for bids and proposals, and contracts wins. It has approximately $5.3 billion as contracts already won, but not yet booked into current backlog which will drive growth.

 

Outlook

 

Ball Corporation reaffirmed comparable EBITDA guidance of $2 billion and expects free cash flow of more than $1 billion in 2019. This is backed by continued strong demand for aluminum packaging and robust aerospace backlog. In 2019, the company expects to surpass long-term target of 10% to 15% earnings per share growth goal.

 

Share Price Performance

 

 

Ball Corporation’s shares have gained around 34% over the past year, outperforming the industry’s growth of 11%.

 

Zacks Rank & Stocks to Consider

 

Ball Corporation currently carries a Zacks Rank #3 (Hold).

 

Some better-ranked stocks in the sector include Alarm.com Holdings, Inc. ALRM, Cintas Corporation CTAS and Enersys ENS. While Alarm.com Holdings sports a Zacks Rank #1 (Strong Buy), Cintas and Enersys carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Alarm.com has a long-term earnings growth rate of 17%. The stock has appreciated 62% over the past year.

 

Cintas has a long-term earnings growth rate of 12%. The company’s shares have gained around 11% over the past year.

 

Enersys has a long-term earnings growth rate of 10%. Its shares have gained 19% over the past year.

 

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