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Ball Corp (BLL) Hits 52-Week High: What's Driving the Rally?

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Shares of Ball Corporation (BLL - Free Report) scaled a fresh 52-week high of $85.09 during the trading session on Sep 15, before retracting a bit to close at $84.43. Solid beverage-can demand, investment in capacity expansion, acquisitions, upbeat second-quarter results as well as solid backlog levels in the Aerospace segment have contributed to this rally.

The company has a market cap of $27.2 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%.

The company’s shares have gained 30.6% so far this year, outperforming the industry’s growth of 21.8%.

Earnings Beat Consensus Mark in Q2

Ball Corporation reported second-quarter adjusted earnings of 65 cents per share, beating the Zacks Consensus Estimate of 57 cents. The bottom line also inched up 1.6% on a year-over-year basis.

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.

The company 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 extend 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 current 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 the ongoing year 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 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.

Ball Corporation maintains its expectation to deliver long-term diluted earnings per share growth of at least 10-15% beyond 2020 and achieve EVA (economic value added) dollars growth of 4-8% per year.

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 9.49%. The same has moved 4.1% north over the past 60 days.

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 - Free Report) , Silgan Holdings, Inc. (SLGN - Free Report) and SiteOne Landscape Supply, Inc. (SITE - Free Report) . While Astec sports a Zacks Rank #1 (Strong Buy), Silgan 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 the ongoing year. The company’s shares have rallied 68.5% in a year’s time.

Silgan has a projected earnings growth rate of 28.7% for 2020. The company’s shares have appreciated 32.9% 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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