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Ball (BLL) Down 3.1% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Ball (BLL - Free Report) . Shares have lost about 3.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ball due for a breakout? 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 drivers.

Ball Corp's Q3 Earnings & Revenues Beat Estimates

Ball Corp reported third-quarter 2020 adjusted earnings of 89 cents per share, beating the Zacks Consensus Estimate of 77 cents. The bottom line also improved 27% on a year-over-year basis. The quarterly results reflect solid global beverage-can demand and backlog growth in the Aerospace segment.

On a reported basis, the company posted earnings of 72 cents per share compared with the prior-year quarter’s 27 cents.

Total sales were $3,093 million in the reported quarter, up 4.7% from the year-ago quarter. The top line surpassed the Zacks Consensus Estimate of $2,976 million. Global beverage can volumes were up 9% in the quarter.

Operational Update

Cost of sales amounted to $2,430 million in third-quarter 2020, up 3% from the year-ago quarter. Gross profit totaled $663 million compared with the year-ago quarter’s $590 million. Gross margin came in at 21.4% during the reported quarter compared with the prior-year quarter figure of 20.0%.

Selling, general and administrative expenses increased 34% year over year to $121 million. Adjusted operating profit improved 14% year-over-year to $419 million. Adjusted operating margin came in at 13.5% compared with the prior-year quarter’s 12.5%.

Segment Performance

The Beverage packaging’s North and Central America segment revenues increased to $1,327 million during third-quarter 2020 from the year-ago quarter’s $1,230 million. Operating earnings surged 33% year over year to $209 million.

Sales at the Beverage packaging, EMEA segment were $809 million in the third quarter, up 6% year over year. Operating earnings increased 11% year over year to $117 million.

The Beverage packaging South America segment’s revenues increased to $432 million in the third quarter from $392 million in the prior-year period. Operating earnings rose to $64 million from the year-earlier quarter’s $60 million.

In the Aerospace segment, sales climbed 21% year over year to $451 million. Operating earnings increased to $44 million from the year-ago quarter figure of $35 million. As of the end of the reported quarter, the segment’s contracted backlog improved 14% year over year to $2.4 billion. Contracts already won but not yet booked into current contracted backlog was $4.9 billion.

Financial Condition

Ball Corp reported cash and cash equivalents of $771 million at the end of the third quarter, up from the $483 million at the end of the year-earlier period. Cash used in operating activities was $345 million in the first nine-month period of 2020 compared with $656 million cash generated in the year-ago period. The company’s long-term debt increased to $7.7 billion at the end of the third quarter from $6.6 billion at the end of prior-year quarter.

Outlook

Given the significant growth prospects in North American beverage business, the company anticipates current-year capital expenditures to exceed $900 million. The company is on track to meet the previously-announced projects and will continue to deploy additional capital across existing business portfolio to support new customer wins. Backed by the ongoing demand for its sustainable aluminum packaging solutions and critical aerospace technologies, the company expects to increase earnings per share in the ongoing year.


 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 6.07% due to these changes.

VGM Scores

At this time, Ball has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Ball has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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