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Ball Corporation Looks Good on Capital Projects; Risks Stay
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We have issued an updated research report on Ball Corporation on May 23, 2016. The company will benefit from focus on successfully executing its capital projects. It will also gain from increasing EVA dollar generation, along with focus on cost optimization and acquisitions. However, currency translation effects, tough comparisons and aluminum exposure remain headwinds for the company.
Notably, the company expects to benefit from increasing EVA dollar generation and multiple growth capital projects ramping up in the remainder of 2016 and beyond. Its businesses will gain momentum through the balance of this year as the growth capital deployed in 2015 transitions into full production.
During the first quarter of 2016, Ball Corporation began production on one of the new beverage can lines and multiple end lines at its Monterrey, Mexico facility, with a second beverage can line scheduled to start up in mid 2016. Further, the addition of new customers at the new aluminum impact extruded aerosol facility in India; increasing efficiency in its new contour bottle line at Conroe, TX, and new tin plate aerosol technology in Chestnut Hill, TN, will also drive growth.
Additionally, Ball Corporation made notable progress with respect to strategic acquisitions. In Jan 2016, its Aerospace and technologies business acquired Wavefront Technologies. The company will leverage its existing hardware capabilities to complement this acquisition. Last year, the company acquired Sonoco’s metal end and closure manufacturing facilities in Canton, OH, and entered into a long-term supply agreement with Sonoco. Further acquisitions will aid Ball Corporation’s business growth.
Moreover, the company continues to execute a disciplined cost control growth equation, with cost-out initiatives like the announced closure of its Weirton, WV steel food and household metal service center, which is expected to cease production in early 2017. In addition, incremental investments will support continued metal aerosol growth and production efficiencies initiatives in Europe and India.
However, Ball Corporation’s first-quarter results were unfavorably impacted by the economic hedges to reduce currency exchange-rate exposure associated with the proposed acquisition of Rexam. In connection with this, the company entered into collar and option contracts to partially mitigate its currency exchange rate risk from Feb 19, 2015, through the expected closing date of the acquisition. Thus, changes in the U.S. dollar to British pound exchange rate pose a concern for the company.
Again, Ball Corporation’s first-quarter earnings were impacted by competitive pricing in China, tough year-over-year comparisons in metal food packaging and start-up costs for growth projects. These factors will remain headwinds for the company’s performance.
At present, Ball Corporation carries a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Some better-ranked stocks in the sector include Crown Holdings Inc. (CCK - Free Report) , Avery Dennison Corporation (AVY - Free Report) and Altra Industrial Motion Corp. . Each of these stocks carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Ball Corporation Looks Good on Capital Projects; Risks Stay
We have issued an updated research report on Ball Corporation on May 23, 2016. The company will benefit from focus on successfully executing its capital projects. It will also gain from increasing EVA dollar generation, along with focus on cost optimization and acquisitions. However, currency translation effects, tough comparisons and aluminum exposure remain headwinds for the company.
Notably, the company expects to benefit from increasing EVA dollar generation and multiple growth capital projects ramping up in the remainder of 2016 and beyond. Its businesses will gain momentum through the balance of this year as the growth capital deployed in 2015 transitions into full production.
During the first quarter of 2016, Ball Corporation began production on one of the new beverage can lines and multiple end lines at its Monterrey, Mexico facility, with a second beverage can line scheduled to start up in mid 2016. Further, the addition of new customers at the new aluminum impact extruded aerosol facility in India; increasing efficiency in its new contour bottle line at Conroe, TX, and new tin plate aerosol technology in Chestnut Hill, TN, will also drive growth.
Additionally, Ball Corporation made notable progress with respect to strategic acquisitions. In Jan 2016, its Aerospace and technologies business acquired Wavefront Technologies. The company will leverage its existing hardware capabilities to complement this acquisition. Last year, the company acquired Sonoco’s metal end and closure manufacturing facilities in Canton, OH, and entered into a long-term supply agreement with Sonoco. Further acquisitions will aid Ball Corporation’s business growth.
Moreover, the company continues to execute a disciplined cost control growth equation, with cost-out initiatives like the announced closure of its Weirton, WV steel food and household metal service center, which is expected to cease production in early 2017. In addition, incremental investments will support continued metal aerosol growth and production efficiencies initiatives in Europe and India.
However, Ball Corporation’s first-quarter results were unfavorably impacted by the economic hedges to reduce currency exchange-rate exposure associated with the proposed acquisition of Rexam. In connection with this, the company entered into collar and option contracts to partially mitigate its currency exchange rate risk from Feb 19, 2015, through the expected closing date of the acquisition. Thus, changes in the U.S. dollar to British pound exchange rate pose a concern for the company.
Again, Ball Corporation’s first-quarter earnings were impacted by competitive pricing in China, tough year-over-year comparisons in metal food packaging and start-up costs for growth projects. These factors will remain headwinds for the company’s performance.
At present, Ball Corporation carries a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Some better-ranked stocks in the sector include Crown Holdings Inc. (CCK - Free Report) , Avery Dennison Corporation (AVY - Free Report) and Altra Industrial Motion Corp. . Each of these stocks carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>