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Ball Corp (BLL) Shares Up 33% YTD: What's Driving the Rally?

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Shares of Ball Corporation have outperformed the industry on a year-to-date basis, aided by continued strong demand for aluminum packaging and focus on new products. The stock has gained 33.7% compared with the industry’s growth of 33.5%.

The company has a market cap of $20.5 billion. Over the last three months, its average volume of shares traded has been approximately 2.37M. The company has an expected long-term earnings per share growth rate of 5.50%.

Let’s delve deeper and analyze the reasons behind the company’s impressive price performance and find out if there is room for further appreciation:

Strong Outlook: Ball Corporation reaffirmed comparable EBITDA guidance of $2 billion and expects free cash flow of more than $1 billion in 2019. This is backed by continued strong demand for aluminum packaging and robust aerospace backlog. For the ongoing year, contributions from its new lines, year-over-year impact of SG&A improvement undertaken in 2018 and plant-cost initiatives will boost earnings growth and margin expansion. In 2019 and beyond, the company anticipates earnings per share to be up 10-15%.

Healthy Growth Projections

The Zacks Consensus Estimate for Ball Corporation’s 2019 earnings per share is currently pegged at $2.61, indicating year-over-year growth of 18.6%. The same for 2020 is pinned at $2.97, calling for a year-over-year rise of 13.7%.

Driving Factors

In the first quarter of 2019, overall global beverage can demand climbed more than 8% — levels not seen in a long time. Customers are now preferring cans over glass and plastic. Ball Corporation remains well poised to meet this growing demand. The company remains actively focused on expanding geographic footprint, aligning with the right customers and markets, growing with new products and capabilities, and leveraging its technical know-how. The company anticipates capital spending of $600 million in the current year.

Ball Corporation’s North American segment will likely benefit from fixed cost savings associated with the North American optimization program, volume growth, improved aluminum can-sheet quality, and reduce start-up costs in 2019 and beyond. The South American industry trends remain strong, with cans being the favored package in the beer, tea, energy and hard alcohol categories. Furthermore, expansions in Paraguay remain on track, while the ones in Argentina and Chile are already contributing to the segment’s growth.
The company’s aerospace business delivered stellar revenues and operating earnings in the first quarter, aided by solid contract performance. The Aerospace business is poised to witness revenue growth of more than 15% this year. With contracted backlog levels of $2.1 billion at the end of the first quarter and won-not-booked backlog at $4.9 billion, the future looks brighter for aerospace for the next three to five years. In addition, the company is initiating additional products to expand its aerospace infrastructure and testing capabilities.

Ball Corporation continues to execute its strategies of achieving better value for standard products and higher growth for specialty products. Specialty cans now represent more than 43% of its mix compared with 30% in 2016. The company focuses on pursuing cost-out programs, completing growth capital projects and commercializing on the inherent sustainability attributes of metal packaging, which will benefit it in the days ahead.

Ball Corporation Price and Consensus

Zacks Rank & Stocks to Consider

Ball Corporation currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Industrial Products sector are DMC Global Inc. (BOOM - Free Report) , Lawson Products, Inc. and Harsco Corporation , each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

DMC Global has an estimated earnings growth rate of 83.5% for the ongoing year. The company’s shares have soared 53.6%, in the past year.

Lawson Products has an expected earnings growth rate of 24.5% for the current year. The stock has appreciated 62% in a year’s time.

Harsco has a projected earnings growth rate of 9.1% for 2019. The company’s shares have gained 5.4%, over the past year.

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