Why Is Ball (BLL) Up 10.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Ball (BLL). Shares have added about 10.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ball due for a pullback? 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 Earnings Beat Estimates in Q2, Up Y/Y

Ball Corp reported second-quarter 2020 adjusted earnings of 65 cents per share, beating the Zacks Consensus Estimate of 57 cents. The bottom line also improved 1.6% on a year-over-year basis. The quarterly results reflect solid aluminum beverage-can demand in North America.

On a reported basis, the company posted earnings of 28 cents per share compared with the prior-year quarter’s 58 cents.

Total sales came in at $2,801 million in the reported quarter, down 7.2% from the year-ago quarter. The top-line figure also missed the Zacks Consensus Estimate of $2,865 million.

Operational Update

Cost of sales came in at $2,230 million in second-quarter 2020, down 8.2% from the year-ago quarter. Gross profit came in at $571 million compared with the year-ago quarter’s $589 million. Gross margin came in at 20.4% during the reported quarter compared with the prior-year quarter figure of 19.5%.

Selling, general and administrative expenses remained flat year over year at $111 million. Adjusted operating income declined 5.8% year over year to $327 million. The company recorded operating margin of 11.7% compared with the prior-year quarter’s 11.5%.

Segment Performance

The Beverage packaging’s North and Central America segment revenues declined to $1,267 million during the April-June period from the year-ago quarter’s $1,286 million. Operating earnings surged 34% year over year to $189 million.

Sales at the Beverage packaging, EMEA segment came in at $699 million in the second quarter, down 8.9% year over year. Operating earnings plunged 35.7% year over year to $63 million.

The Beverage packaging South America segment’s revenues declined to $329 million in the second quarter from the $377 million witnessed in the prior-year period. Operating earnings fell to $46 million from the year-earlier quarter’s $65 million.

In the Aerospace segment, sales rose 15.6% year over year to $438 million. Operating earnings declined to $30 million from the year-ago quarter figure of $38 million. As of the end of the reported quarter, the segment’s contracted backlog was $2.1 billion and contracts already won, but not yet booked into current contracted backlog, increased 10% year to date to $5.3 billion.

Financial Condition

Ball Corp reported cash and cash equivalents of $643 million at the end of the second quarter, down from the $764 million recorded at the end of the year-earlier period. Cash used in operating activities was $232 million in the first half of 2020 compared with $253 million cash generated in the first half of 2019. The company’s long-term debt increased to $7.2 billion at the end of the second quarter from $6.9 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 its existing business portfolio to support new customer wins.

The company expects to increase its earnings per diluted share in the ongoing year. Moreover, Ball Corp maintains its expectation to deliver long-term diluted earnings per share growth of at least 10-15% beyond 2020 and achieve additional EVA (economic value added) dollars enhancing opportunities.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, Ball has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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. Notably, Ball has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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