A month has gone by since the last earnings report for Ball (BLL). Shares have added about 12.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ball due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Ball Corp's Q1 Earnings Beat, Sales Lag Estimates
Ball Corporation reported first-quarter 2020 adjusted earnings of 61 cents per share, beating the Zacks Consensus Estimate of 60 cents. The bottom line also improved 24% on a year-over-year basis.
On a reported basis, the company posted earnings of 7 cents per share compared with 34 cents in the prior-year quarter.
Total sales came in at $2,785 million in the reported quarter, flat compared with the year-ago quarter. The top line missed the Zacks Consensus Estimate of $2,842 million. However, global beverage can volumes were up 4% in the quarter.
Cost of sales came in at $2,215 million in first-quarter 2020, down 2% from the year-ago quarter. Gross profit was at $570 million in the first quarter compared with $532 million in the year-ago quarter. Gross margin came in at 20.5% during the reported quarter compared with the prior-year quarter figure of 19.1%.
Selling, general and administrative expenses rose 3% year over year to $131 million. Adjusted operating income increased 12% to $307 million from the year-ago quarter figure of $275 million. The company reported operating margin of 11.0% compared with 9.9% in the prior-year comparable period.
The Beverage packaging’s North and Central America segment revenues increased to $1,181 million in first-quarter 2020 from $1,131 million a year ago. Operating earnings surged 24% year over year to $146 million.
Sales at the Beverage packaging, Europe segment came in at $669 million in the reported quarter, declining 2% year over year. Operating earnings decreased 8% year over year to $687 million.
The Beverage packaging South America segment’s revenues declined to $405 million in first-quarter 2020 from $441 million in the prior-year comparable period. Operating earnings fell to $63 million from $68 million in the year-earlier quarter.
In the Aerospace segment, sales rose 32% year over year to $432 million. Operating earnings increased to $40 million from year-ago quarter figure of $30 million. As of the end of first-quarter 2020, the segment’s contracted backlog was at $2.3 billion.
Ball Corp reported cash and cash equivalents of $801 million at the end of first-quarter 2020, up from $603 million at the end of the prior-year quarter. Cash used in operating activities were $708 million during the reported quarter, compared with $129 million in the year-ago quarter. The company’s long-term debt increased to $7.5 billion as of Mar 31, 2020, from $6.7 billion as of Dec 31, 2019.
In the wake of the coronavirus pandemic, Ball Corporation has taken actions to focus on cash and liquidity, while continuing to pay dividends and execute growth investments. The company expects to generate free cash flow in the range of $500 million in 2020.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -21.48% due to these changes.
Currently, Ball has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Ball has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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