Ball Corporation BLL is poised to gain from strong backlog, new projects, focus on cost-cutting actions and acquisitions. This Zacks Rank #3 (Hold) company has an estimated long-term earnings growth rate of 5.5%.
Below, we briefly discuss the company’s growth drivers and possible headwinds.
Factors Favoring Ball Corporation
Positive Earnings Surprise History
Ball Corporation outpaced the Zacks Consensus Estimate in three of the last four quarters, recording average beat of 4.96%.
Ball Corporation’s shares have outperformed the industry over the past year. The stock has gained around 25%, while the industry grew 10%.
Ball Corporation delivered adjusted earnings of 56 cents per share in third-quarter 2018, improving around 8% year over year. Total revenues increased 1.3% year over year to $2.9 billion. The company’s results were driven by strong operational performance in every business and lower corporate costs, despite certain start-up costs, elevated transportation costs and higher effective tax rate.
Ball Corporation expects free cash flow to be around $800 million and capital spending to be in excess of $700 million in 2018. While EBITDA guidance is anticipated at $2 billion, free cash flow will be more than $1 billion in 2019. In 2019 and beyond, the company expects earnings per share to be up 10% to 15%.
The company continues to execute its strategies of achieving better value for standard products and higher growth for specialty products. The company will also focus on pursuing cost-out programs, completing growth capital projects and commercializing on the inherent sustainability attributes of metal packaging.
Solid Earnings Growth Expectations
The Zacks Consensus Estimate for earnings for fiscal 2018 and 2019 reflects year-over-year growth of 7.8% and 18.5%, respectively.
Growth Drivers in Place
In 2018, Ball Corporation will focus primarily on expanding its geographic footprint, aligning with the right customers and markets, growing with new products and capabilities, and leveraging its technical knowhow. In line with this, Ball Corporation began production at all four new facilities of its specialty beverage-can manufacturing facility in Goodyear during the third quarter of 2018.
To support growth for beverage cans in the Iberian Peninsula, the company constructed a two-line, aluminum beverage can manufacturing facility near Madrid, Spain, with a majority of the facility’s capacity secured under a long-term customer contract. The facility began initial commercial production on one line in July 2018 and will produce multiple can sizes once it is fully operational. In October 2018, the company announced that it intends to invest in its beverage container plant in Nogara, Italy. It has approximately $5.3 billion as contracts already won, but not yet booked into current backlog which will drive growth.
Regarding the Rexam acquisition which was closed in June 2016, Ball Corporation is on track to achieve its 2019 targets largely through the stated synergy benefits from the transaction. From the synergy perspective, the company had a three-and-a-half year plan to realize $300 million of net synergies.
Investors might want to hold on to the stock, at present, as it has ample prospects of outperforming peers in the near future.
Stocks to Consider
Some better-ranked stocks in the sector include Alarm.com Holdings, Inc. ALRM, Enersys ENS and Heritage-Crystal Clean, Inc. HCCI. While Alarm.com Holdings sports a Zacks Rank #1 (Strong Buy), Enersys and Heritage-Crystal Clean 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 17.1%. The company’s shares have gained around 46% over the past year.
Enersys has a long-term earnings growth rate of 10%. Its shares have gained 9%, over the past year.
Heritage-Crystal Clean has a long-term earnings growth rate of 15%. The stock has appreciated 11% over the past year.
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