Ball Corp. Beats Estimates - Analyst Blog
October 27 2011 - 1:35PM
Zacks
Ball Corporation (BLL) reported net earnings of
$132.1 million or 79 cents per share in the third quarter of 2011,
declining significantly from $227.5 million or $1.25 per share in
the year-ago quarter.
However, excluding business consolidation costs and other
charges and benefits, the company’s adjusted income in the quarter
came in at $135.4 million or 81 cents per share compared with
$127.7 million or 70 cents per share a year ago. Adjusted income
per share was also higher than the Zacks Consensus Estimate of 78
cents per share.
Solid demand for metal packaging in China and Europe, strong
aerospace program performance, increased demand for metal beverage
cans in North America and tax benefits in Brazil contributed
significantly toward Ball’s earnings in the reported quarter.
Net sales increased 10.8% year over year to $2.26 billion and
also beat the Zacks Consensus Estimate of $2.23 million. The
improvement in revenues was attributable to better performances
across all the company’s operating segments except Metal, Food &
Household packaging, Americas.
Cost of sales increased to $1.86 billion from $1.65 billion in
the year-ago quarter, while selling, general and administrative
expense dropped to $89.7 million from $93.0 million last year.
Segment Performance
Metal Beverage Packaging, Americas &
Asia: Sales for the segment increased 13% year over
year to $1.13 billion. Operating earnings were $120.1 million
compared with $112.8 million in the third quarter of 2010. The
segment benefited from strong demand in China and increased volumes
in North America.
Metal Beverage Packaging, Europe: This
segment reported sales of $515.7 million, up 16.2% year over year,
driven by increased volumes in the extruded aluminum packaging
business, acquired in the beginning of the year and higher exchange
rate, partly offset by declining beverage can volumes. Operating
earnings were $64.9 million compared with $63.7 million in the
third quarter of 2010.
Metal Food & Household Products Packaging,
Americas: Sales in the segment dipped 1.6% year over
year to $413.2 million. Operating earnings were $39.5 million
compared with $49.4 million in the third quarter of 2010. Poor
vegetable pack resulted in decreased food can volumes, which in
turn led to lower sales.
Aerospace and Technologies: Sales for
the segment improved 24.1% year over year to $208.4 million in the
quarter. Operating earnings increased to $21.2 million from $18.4
million in the third quarter of 2010. The segment had a backlog of
$985.5 million at quarter end.
Financial Performance
As of October 02, 2011, cash and cash equivalents increased to
$190.1 million from $168.7 million as of September 26, 2010.
Long-term debt increased to $2.98 billion as of October 02, 2011
from $2.05 billion as of September 26, 2010. Inventories rose to
$1.09 billion at the end of the third quarter in 2011 from $898.9
million at the end of the third quarter in 2010.
Cash flow from operating activities was approximately $448.5
million in the first nine months of 2011 compared with $355.9
million in the comparable period of 2010, reflecting higher
earnings. Capital expenditure was $323.8 million in the first three
quarters of 2011 versus $131.1 million in the year-ago period,
reflecting the company’s business expansion plans.
Outlook
Management expects to generate approximately $400 million in
free cash flow. The company also plans to incur $500 million in
capital expenditure of which $300 million will be invested in
growth projects.
Our Take
Ball Corporation is set to deliver better results due to the
successful integration of acquisitions, continued growth in the
emerging markets and a focus on enhancing shareholder value.
However, tough competition in the packaging business keeps the
company under pressure to maintain profitability. It mainly
competes with Crown Holdings Inc. (CCK),
Rexam Plc (REXMY) and Silgan Holdings
Inc. (SLGN).
Headquartered in Broomfield, Colorado, Ball Corp. is a
manufacturer of metal and plastic packaging, primarily for
beverages and foods. It also supplies aerospace and other
technologies and services to government as well as commercial
customers.
Considering all these, we are maintaining our Neutral
recommendation on the shares of Ball Corporation over the long
term.
BALL CORP (BLL): Free Stock Analysis Report
CROWN HLDGS INC (CCK): Free Stock Analysis Report
REXAM PLC-ADR (REXMY): Free Stock Analysis Report
SILGAN HOLDINGS (SLGN): Free Stock Analysis Report
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