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Ball Corp (BALL) Inks Deal to Sell Aerospace Unit for $5.6B
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Ball Corporation (BALL - Free Report) announced that it reached an agreement to sell its aerospace business to BAE Systems for gross proceeds of $5.6 billion in cash. This move will help the company focus more on its core packaging operations, which have solid growth potential, as well as lower its elevated debt levels. The company’s shares have gained 3% in pre-market trading on the news.
The Aerospace business consists of operations that manufacture and sell aerospace and other related products and provide services to the defense, civil space and commercial space industries. The segment contributed 14% to the company’s sales in 2022. Ball Corp had indicated in June 2023 that it was contemplating the sale of the unit.
The deal struck with BAE Systems is subject to regulatory approvals and customary closing conditions and is expected to close in the first half of next year. The aerospace unit will be a better fit for U.K-based BAE systems, which provides defense, aerospace, and security solutions worldwide.
The purchase price represents 19.6x Ball Aerospace's LTM comparable EBITDA, as of Jun 30, 2023. Ball Corp intends to use half of the after-tax proceeds (around $4.5 billion) and the free cash flow generated from the existing packaging operations, to lower its debt levels.
BALL expects to take its net debt to pro forma expected 2023 comparable EBITDA to approximately 3.0x, at the low-end of the its targeted long-term leverage range. The net debt to comparable EBITDA for the twelve months ending Jun 30, 2023, was 4.6x.
The beverage can industry has immense potential as customers now prefer cans over plastic owing to increasing awareness about environmental problems. Changing lifestyle choices, population growth and increasing disposable income have led to this shift. An estimated 75% of new beverage product launches are now in cans. Aluminum cans are the most widely used beverage packaging option as they can be easily recycled and are also cost effective. Per Statista, the global aluminum can market is expected to grow to $87.1 billion in 2030, at a CAGR of 5.4%, compared with 2021.
To tap the growth in the industry, the company has been building up its beverage can production capacity in North America, EMEA and South America. It has also been investing in aluminum cups business. Notably, Ball’s aluminum cup is composed of 90% recycled content, which is the highest recycled content rate of any beverage packaging in its category.
With the divestiture of the aerospace unit, Ball Corp can now solely focus on growing the packaging business. Equipped with a lower average invested capital base and the high cash generative packaging business, the company will be well-positioned to continue to reward its shareholders through share repurchases and dividends while also investing in growth.
Price Performance
The company’s shares have lost 11% over the past year compared with the industry’s 10.4% decline.
Image Source: Zacks Investment Research
Zacks Rank and Key Picks
Ball Corp currently carries a Zacks #3 Rank (Hold).
Astec has an average trailing four-quarter earnings surprise of 19.95%. The Zacks Consensus Estimate for ASTE’s fiscal 2023 earnings is pegged at $3.11 per share. The consensus estimate for 2023 earnings has moved 14% north in the past 30 days and indicates year-over-year growth of 153%. Its shares gained 17.4% in the last year.
The Zacks Consensus Estimate for CAT’s 2023 earnings per share is pegged at $19.25. Estimates were revised upward 7% over the last 30 days. The fiscal 2023 earnings estimate projects year-over-year growth of 39%. It has a trailing four-quarter average earnings surprise of 18.5%. CAT’s shares gained 40% in the last year.
Terex has an average trailing four-quarter earnings surprise of 32.8%. The Zacks Consensus Estimate for TEX’s 2023 earnings is pegged at $6.70 per share. The consensus estimate for 2023 earnings has moved 55% north in the past 30 days. The estimate suggests year-over-year growth of 55%. TEX’s shares gained 60% in the last year.
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Ball Corp (BALL) Inks Deal to Sell Aerospace Unit for $5.6B
Ball Corporation (BALL - Free Report) announced that it reached an agreement to sell its aerospace business to BAE Systems for gross proceeds of $5.6 billion in cash. This move will help the company focus more on its core packaging operations, which have solid growth potential, as well as lower its elevated debt levels. The company’s shares have gained 3% in pre-market trading on the news.
The Aerospace business consists of operations that manufacture and sell aerospace and other related products and provide services to the defense, civil space and commercial space industries. The segment contributed 14% to the company’s sales in 2022. Ball Corp had indicated in June 2023 that it was contemplating the sale of the unit.
The deal struck with BAE Systems is subject to regulatory approvals and customary closing conditions and is expected to close in the first half of next year. The aerospace unit will be a better fit for U.K-based BAE systems, which provides defense, aerospace, and security solutions worldwide.
The purchase price represents 19.6x Ball Aerospace's LTM comparable EBITDA, as of Jun 30, 2023. Ball Corp intends to use half of the after-tax proceeds (around $4.5 billion) and the free cash flow generated from the existing packaging operations, to lower its debt levels.
BALL expects to take its net debt to pro forma expected 2023 comparable EBITDA to approximately 3.0x, at the low-end of the its targeted long-term leverage range. The net debt to comparable EBITDA for the twelve months ending Jun 30, 2023, was 4.6x.
The beverage can industry has immense potential as customers now prefer cans over plastic owing to increasing awareness about environmental problems. Changing lifestyle choices, population growth and increasing disposable income have led to this shift. An estimated 75% of new beverage product launches are now in cans. Aluminum cans are the most widely used beverage packaging option as they can be easily recycled and are also cost effective. Per Statista, the global aluminum can market is expected to grow to $87.1 billion in 2030, at a CAGR of 5.4%, compared with 2021.
To tap the growth in the industry, the company has been building up its beverage can production capacity in North America, EMEA and South America. It has also been investing in aluminum cups business. Notably, Ball’s aluminum cup is composed of 90% recycled content, which is the highest recycled content rate of any beverage packaging in its category.
With the divestiture of the aerospace unit, Ball Corp can now solely focus on growing the packaging business. Equipped with a lower average invested capital base and the high cash generative packaging business, the company will be well-positioned to continue to reward its shareholders through share repurchases and dividends while also investing in growth.
Price Performance
The company’s shares have lost 11% over the past year compared with the industry’s 10.4% decline.
Image Source: Zacks Investment Research
Zacks Rank and Key Picks
Ball Corp currently carries a Zacks #3 Rank (Hold).
Some better-ranked stocks in the Industrial Products sector are Astec Industries (ASTE - Free Report) , Caterpillar (CAT - Free Report) and Terex Corporation (TEX - Free Report) . These companies sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Astec has an average trailing four-quarter earnings surprise of 19.95%. The Zacks Consensus Estimate for ASTE’s fiscal 2023 earnings is pegged at $3.11 per share. The consensus estimate for 2023 earnings has moved 14% north in the past 30 days and indicates year-over-year growth of 153%. Its shares gained 17.4% in the last year.
The Zacks Consensus Estimate for CAT’s 2023 earnings per share is pegged at $19.25. Estimates were revised upward 7% over the last 30 days. The fiscal 2023 earnings estimate projects year-over-year growth of 39%. It has a trailing four-quarter average earnings surprise of 18.5%. CAT’s shares gained 40% in the last year.
Terex has an average trailing four-quarter earnings surprise of 32.8%. The Zacks Consensus Estimate for TEX’s 2023 earnings is pegged at $6.70 per share. The consensus estimate for 2023 earnings has moved 55% north in the past 30 days. The estimate suggests year-over-year growth of 55%. TEX’s shares gained 60% in the last year.