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Ball Corp (BLL) Q3 Earnings Lag, '17 Financial Goals Updated

Ball Corporation BLL reported third-quarter 2017 adjusted earnings of 52 cents per share, missing the Zacks Consensus Estimate of 59 cents. Earnings, however, were up 8.3% year over year.

On a reported basis, the company posted earnings of 13 cents per share compared to 9 cents per share recorded in the prior-year quarter.

Total revenues increased 5.7% year over year to $2.908 billion in the reported quarter. Revenues fell short of the Zacks Consensus Estimate of $2.942 billion.

Ball Corporation Price, Consensus and EPS Surprise

 

Ball Corporation Price, Consensus and EPS Surprise | Ball Corporation Quote

 

Ball Corporation’s results were driven by improved operating performance, largely in South America, offset by lower-than-expected operating earnings in Beverage Packaging, North and Central America segment due to the impact of multi-plant downtime, higher freight rates and out-of-pattern freight caused by U.S. hurricanes later in the quarter.

Operational Update

Cost of sales went up 2.8% year over year to $2.34 billion. Gross profit jumped 19.5% year over year to $570 million. Gross margin expanded 230 basis points (bps) to 19.6%.

Selling, general and administrative expenses dropped 5.9% year over year to $127 million. Adjusted operating income inched up 0.6% to $313 million from $311 million reported in the year-ago quarter. The company reported operating margin of 10.8%, down 50 bps year over year.

Segment Performance

The Beverage packaging’s North and Central America segment’s revenues inched up 0.4% year over year to $1,080 million in the reported quarter. Operating earnings of $121 million decreased 16.6% year over year.

Sales at the Beverage packaging, Europe segment came in at $651 million in the reported quarter, advancing 4.3% year over year. Operating earnings increased 2.8% year over year to $74 million.

The Beverage packaging South America segment’s revenues surged 33.6% year over year to $425 million in the reported quarter. Operating earnings of $78 million recorded a substantial improvement from $60 million in the prior-year quarter.

The Food and Aerosol Packaging segment’s sales came in at $321 million, declining 2.4% year over year. Operating earnings dipped 3.2% year over year to $30 million.

In the Aerospace and Technologies segment, sales went up 18% year over year to $241 million. Operating earnings decreased 4.2% year over year to $23 million. The segment’s backlog came in at around $1.2 billion at the end of the third quarter.

Financial Condition

Ball Corporation had cash and cash equivalents of $556 million at the end of the third quarter 2017 compared with $645 million recorded at the end of third-quarter 2016. The company recorded cash from operations of $747 million for the nine-month period ended Sep 30, 2017, compared with cash usage of $433 million recorded in the year-earlier quarter. Ball Corporation’s long-term debt decreased to $7,104 million for the nine-month period ended Sep 30, 2017, from $7,724 million in the year-ago period.

Outlook

Ball Corporation updated its financial goals for 2017. The company expects its free cash flow tobe in excess of $850 million after capital spending in the range of $550 million. The company reaffirmed its financial goals for 2019. It expects comparable EBITDA to be $2 billion and free cash flow is estimated to be in excess of $1 billion. It also expects to achieve $300 million-plus of run-rate synergies.

Ball Corporation continues to make progress on global finance transformation projects and corporate cost-out initiatives with the opening of shared service centers in Belgrade, Serbia, and Querétaro, Mexico. These multi-year activities, coupled with normalized operating conditions in Beverage Packaging, North and Central America segment will help achieve the company’s long-term financial goals of $2 billion of comparable EBITDA and in excess of $1 billion of free cash flow by 2019. Further, the beverage manufacturing plant network optimizations in 2018, new specialty beverage can plants in the United States and Spain, as well as continuing aerospace and aerosol growth will support its long-term financial objective.

Share Price Performance

Ball Corporation’s share price has underperformed the industry over the past year. The stock has gained 11% compared with 14% growth recorded by the industry during the said time frame.



Zacks Rank and Key Picks

Ball Corporation currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same sector are China National Materials Company Limited CASDY, Caterpillar Inc. CAT and Lakeland Industries, Inc. LAKE. All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

China National Materials has an expected long-term growth rate of 20%.

Caterpillar has an expected long-term growth rate of 9.5%.

Lakeland has an expected long-term growth rate of 10%.

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