Ball Corp (BLL) Shares Up 27% YTD: What's Driving the Upside?
Shares of Ball Corporation BLL have outperformed the industry so far this year on solid beverage-can demand, capacity expansion, introduction of fresh products, acquisitions, upbeat first- and second-quarter results, as well as stellar backlog levels in the Aerospace segment. The stock has gained 27.2% year to date, outperforming the industry’s growth of 18.6%.
Ball Corporation has a market cap of $26.6 billion. It has an expected long-term earnings per share growth rate of 5%. The company has a trailing four-quarter average earnings surprise of 4%.
Let’s delve deeper:
Earnings Beat Consensus Estimates
Ball Corporation reported second-quarter 2020 adjusted earnings of 65 cents per share, beating the Zacks Consensus Estimate of 57 cents. In the March-end quarter, adjusted earnings of 61 cents per share also surpassed the Consensus Mark of 60 cents. The bottom lines in the first and second quarters improved 24% and 1.6% respectively, on a year-over-year basis.
Healthy Growth Projections
The Zacks Consensus Estimate for Ball Corporation’s current-year earnings per share is pegged at $2.77, indicating year-over-year growth of 9.5%. The same has moved 4% north over the past 60 days.
Driving Factors
Global beverage-can demand continues to shoot up as consumers now prefer cans over glass and plastic. Thus, the company has been primarily investing in aluminum packaging production, in a bid to cater to this rising demand. The company expects its previously-announced aluminum beverage can and cup projects to add at least 8 billion units of capacity by the end of 2021.
Ball Corporation recently announced its plans to build a new U.S. aluminum beverage packaging plant in Pittston, PA that will cater to the rising demand for the infinitely-recyclable aluminum containers used in spiked seltzer, sparkling water, beer and carbonated beverage categories. This multi-line beverage can plant is slated to begin production in mid-2021, and join the company’s other North American beverage can manufacturing facilities.
Recently, the company completed the acquisition of the Brazilian aluminum aerosol packaging business — Tubex. The transaction will enable the company to expand its geographic reach.
The Beverage packaging, North and Central America segment is expected to benefit from new customer contracts, operational efficiency, strong demand for aluminum beverage packaging and increased availability of cans in the ongoing year. The Beverage Packaging, EMEA segment will likely gain from the multiple beverage-can line additions that will be executed across the existing European plant network in 2020 and beyond in order to meet demand. The Beverage Packaging, South America segment will grow on the increasing preference for aluminum beverage packaging over other options.
Apart from this, the Aerospace segment’s contracted backlog remains solid at $2.1 billion as of second-quarter 2020 end. The segment continues to win and provide mission-critical programs and technologies to the U.S. government, defense, intelligence, reconnaissance and surveillance customers.
The company’s cost-cutting actions will likely bolster its margins. Further, it has taken actions to improve operational performance in the aluminum aerosol business, while initiating additional products to expand the company’s aerospace infrastructure and testing capabilities.
Moreover, the company’s top-line performance is likely to gain from the elevated demand in consumer-oriented end markets, such as food and beverages, household, and healthcare, amid the COVID-19 pandemic. Also, higher at-home consumption is anticipated to spur beverage can demand.
Zacks Rank & Stocks to Consider
Ball Corporation currently carries a Zacks Rank #3 (Hold)
Some better-ranked stocks in the Industrial Products sector include Astec Industries, Inc. ASTE, Berry Global Group, Inc. BERY and SiteOne Landscape Supply, Inc. SITE. While Astec sports a Zacks Rank #1 (Strong Buy), Berry and SiteOne carry a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Astec has an estimated earnings growth rate of 13.5% for 2020. The company’s shares have rallied 68.5% in a year’s time.
Berry has a projected earnings growth rate of 32.3% for fiscal 2020. Shares of the company have appreciated 21.8% over the past year.
SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has surged 61.6% in the past year.
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