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Ball Downgraded to Strong Sell

Zacks Equity Research

On Jun 8, Zacks Investment Research downgraded Ball Corporation (BLL) to a Zacks Rank #5 (Strong Sell).

Why Downgraded?

Ball Corporation’s earnings estimates witnessed a downward trend after reporting disappointing first quarter 2013 results on Apr 25. Earnings estimates for this manufacturer of metal and plastic packaging for beverages and foods have been on the downside due to slow start to volumes in the second quarter and continued headwinds - 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% to 58 cents per share from 63 cents per share in the year-ago quarter. The results also fell short of the Zacks Consensus Estimate of 64 cents, a negative surprise of 9.38%. 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 weakness in Europe will continue to weigh on Ball’s European business in the next year. Furthermore, the company continues to face pricing pressure in China given excess capacity in the region. Recently, Ball has lost customers who shifted buying from new suppliers. This loss of share will weigh on Ball’s results as well as on investor sentiment. Furthermore, Ball’s Aerospace and Technologies 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 also stated that the company will be unable to achieve its long-term target of 10% to 15% diluted earnings per share growth in 2013.

Over the last 60 days, the Zacks Consensus Estimate for fiscal 2013 decreased 4% to $3.19 per share and for fiscal 2014 it went down 4% to $3.55 per share.

Other Stocks to Consider

Not all stocks in the industry are performing as poorly as Ball Corporation. Resolute Forest Products Inc. (RFP) with a Zacks Rank #1(Strong Buy), and Rock-Tenn Company (RKT) and Berry Plastics Group, Inc. (BERY), carrying a Zacks Rank #2 (Buy) are some stocks worth considering.

Read the Full Research Report on BLL

Read the Full Research Report on BERY

Read the Full Research Report on RKT

Read the Full Research Report on RFP

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