Ball Corporation is scheduled to report fourth-quarter 2018 results on Jan 31, before the opening bell.

 

In the last reported quarter, Ball Corporation reported an increase of 8% and 1% in earnings and revenues, respectively. While earnings missed the Zacks Consensus Estimate, revenues beat the same. Notably, the company has surpassed the Zacks Consensus Estimate in two of the trailing four quarters while missing on one occasion, generating an average positive surprise of 4.96%.

 

Let’s see how things are shaping up for this announcement.

In July 2018, Ball Corporation concluded the sale of its U.S. steel food and steel aerosol packaging assets, and formed a joint venture, Ball Metalpack. The company received approximately $600 million in after-tax proceeds as part of the transaction. Cash proceeds from the food and aerosol sale have been utilized to acquire stocks and further reduce debt. Given the timing of the sale versus the timing of using the proceeds to repurchase shares, it will continue to be slightly dilutive to earnings in the fourth quarter.

 

The company’s North American segment is expected to benefit from fixed cost savings and reduce start-up costs in late 2018 and beyond. The South American industry trends remain strong, with cans being the favored package in the beer, tea, energy and hard alcohol categories. Its South America segment will benefit from seasonally strong fourth quarter. Further, the expansions in Argentina, Paraguay and Chile are on track and will drive the segment’s growth in 2019 and beyond. Ball Corporation’s European business’ earnings were up 14% year over year in the third quarter, driven by cost out and volume growth. The business will benefit from the second line ramping up in Spain and the completion of G&A transformation projects.

 

The company’s Zacks Consensus Estimate for net sales for Beverage packaging, South America segment is pegged at $512 million, reflecting a decline of around 6% year over year. The segment’s operating income is anticipated to drop 35% year over year to $83 million.

 

The Zacks Consensus Estimate for sales in the Beverage packaging, Europe segment is pegged at $560 million in the fourth quarter, reflecting year-over-year growth of 4%. Segment operating income for the segment is projected at $64 million, indicating an improvement of 31% year over year.

 

The Zacks Consensus Estimate for Aerospace segment's revenues is pegged at $303 million in the to-be-reported quarter, reflecting year-over-year increase of about 18%. The segment’s operating income is expected to log year-over-year growth of 24% to $35 million.

 

The Beverage packaging North and Central America segment is expected to report sales of $1,053 million, up 6% year-over-year. Segment operating income for the segment is projected at $145 million, indicating year-over-year improvement of 9%.

 

Overall strong backlog, new products and focus on cost-cutting actions will drive growth. The company will also gain from the Ball Metalpack joint venture. Headwind related to currency, higher freight rates and tight metal supply in the United States is likely to affect Ball Corporation’s results.

 

The Zacks Consensus Estimates for Ball Corporation’s earnings per share is pegged at 56 cents for the December-end quarter, reflecting year-over-year decline of 6.7%. The Zacks Consensus Estimate for total sales of $2.68 billion for the to-be-reported quarter indicates a decline of 2.5% from the prior-year quarter.

 

 

Our proven model does not conclusively show that Ball Corporation is likely to beat on earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. This is not the case here as you will see below:  

 

Earnings ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate of 56 cents and the Zacks Consensus Estimate of 60 cents, is -6.67%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

 

Zacks Rank: Ball Corporation currently carries a Zacks Rank of 3. While this increases the predictive power of ESP, we also need to have a positive ESP to be confident about an earnings surprise.

 

It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

 

 

 

 

Ball Corporation’s shares have gained around 30% over the past year, outperforming the industry’s growth of 7%.

 

 

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

 

HD Supply Holdings, Inc. has an Earnings ESP of +1.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Caterpillar Inc. (CAT Quick QuoteCAT - Free Report) has an Earnings ESP of +0.30% and a Zacks Rank #3.

 

Dover Corporation (DOV Quick QuoteDOV - Free Report) has an Earnings ESP of +0.93% and a Zacks Rank #3.

 

 

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