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Ball Corp to Gain From High Beverage Can Demand, FX Woes Stay

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On Aug 7, we issued an updated research report on Ball Corporation . The company is poised to benefit from growing preference for aluminium packaging, strong backlog in the aerospace segment, new products and focus on cost-cutting actions. However, headwinds related to currency, higher freight rates and tight metal supply in the United States remain headwinds.

Let’s analyze these factors in detail.

Rising Beverage Can Demand to Boost Growth

Overall global beverage can demand continues to grow as customers are now preferring cans over glass and plastic. Ball Corporation remains poised to capitalize on this demand by investing in capacity and products. The company expects capital spending to be $600 million in 2019.  Ball Corporation continues to execute its strategies of achieving better value for standard products and higher growth for specialty products. Its focus on cost-cutting actions will also bolster margins.

Segments Poised for Growth

The company expects to achieve EBITDA of $2 billion and free cash flow of more than $1 billion in 2019, backed by continued strong demand for aluminum packaging and robust aerospace backlog. The Beverage Packaging, North and Central America segment will gain from volume growth, net fixed cost savings in the back half of 2019.

The Beverage Packaging, South America segment is also poised well for improved results in 2019 as industry beverage can demand in South America, particularly in Brazil, remains strong. Beer customers are shifting from glass packaging to aluminum cans, and overall consumption of alcohol and non-alcoholic products are on the rise. The Beverage Packaging, Europe segment will also gain on customers’ growing preference for cans and increased production in new lines in the company’s existing facilities.

Ball Corporation expects the Aerospace segment’s revenues to be up nearly 25% for the full year backed by strong backlog. The Aerospace segment has won contracts worth $4.8 billion since the end of second quarter 2019. The segment’s earnings are also expected to improve year over year throughout 2019.

Few Headwinds Ahead

Headwinds related to currency, higher freight rates and depressed market for scrap aluminum are likely to affect Ball Corporation’s results. The North and Central America segment remains challenged with U.S. aluminum scrap headwinds and sequential project startup cost. These start-up costs will remain a concern in 2019. Additionally, conflicts in the Middle Eastern are likely to impact volumes in the region.

Price Performance

Ball Corporation's shares have surged 81.5% over the past year compared with the industry’s growth of 52.1%.

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 Albany International Corporation (AIN - Free Report) , Unifirst Corporation (UNF - Free Report) , and Cintas Corporation (CTAS - Free Report) . While Albany International and Unifirst flaunt a Zacks Rank #1 (Strong Buy), Cintas carries a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Albany International has an estimated earnings growth rate of 32.3% for 2019. The company’s shares have gained 8% in the past year.

Unifirst has a projected earnings growth rate of 15.17% for the current year. The stock has rallied 2% in a year’s time.

Cintas Corporation has an expected earnings growth rate of 11.15% for the ongoing year. The stock has appreciated 23% over the past year.

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