Why Is Ball (BLL) Up 7.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Ball (BLL). Shares have added about 7.6% 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 catalysts.

Ball Corp's Earnings and Sales Miss Estimates in Q2

Ball Corporation (NYSE:BLL) reported second-quarter 2019 adjusted earnings of 64 cents per share, missing the Zacks Consensus Estimate of 65 cents by a whisker. The reported figure, however, improved 10.3% on a year-over-year basis on strong demand trends in both metal beverage packaging and aerospace businesses.

On a reported basis, the company posted earnings of 58 cents per share compared with 34 cents per share recorded in the prior-year quarter.

Total revenues declined to $3,017 million in the reported quarter from $3,101 million in the year-ago quarter. The top line also missed the Zacks Consensus Estimate of $3,028 million. Global beverage can volumes were up 5% in the quarter, driven by a 13% increase in global specialty can volumes.

Operational Update

Cost of sales went down 2.2% year over year to $2,428 million. Gross profit slipped to $589 million from the year-ago quarter’s $617 million. Gross margin came in at 19.5% during the second quarter compared with the prior-year quarter’s 19.9%.

Selling, general and administrative expenses dipped 12.6% year over year to $111 million. Adjusted operating income was down 1.4% to $347 million from the year-ago quarter’s reported figure of $352 million. The company reported operating margin of 11.5% compared with the prior-year’s 11.3%.

Segment Performance

The Beverage packaging’s North and Central America segment revenues were up 3.6% year over year to $1,286 million in the April-June quarter. Operating earnings of $141 million decreased 10.2% year over year.

Sales in the Beverage packaging, Europe segment came in at $715 million in the reported quarter, improving 1.7% year over year. Operating earnings climbed 16% year over year to $87 million.

The Beverage packaging South America segment’s revenues edged down to $377 million during the June-end quarter from $379 million in the comparable period last year. Operating earnings moved down to $65 million from $66 million recorded in the year-earlier quarter. Industry beverage can demand in Brazil remains solid.

In the Aerospace and Technologies segment, sales jumped 30.6% year over year to $379 million. Operating earnings surged 58.3% year over year to $38 million. As of the second quarter-end, the segment’s contracted backlog exceeded $2 billion. Since then, the company has won contracts worth $4.8 billion, which have not yet been included in the backlog.

Financial Condition

Ball Corporation reported cash and cash equivalents of $764 million at the end of the second quarter, up from $549 million held at the end of the year-earlier quarter. Cash flow from operating activities were $253 million during the six-month period ended Jun 30, 2019 compared with $434 million recorded in the prior-year comparable period. The company’s long-term debt decreased to $6,916 million as of Jun 30, 2019, from $7,171 million as of Jun 30, 2018.

Outlook

Ball Corporation forecasts higher-than-anticipated growth in global beverage container businesses in the upcoming period. The company aims to accelerate growth investments. In 2019, the company expects to surpass its long-term target of 10-15% earnings per share growth goal.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, Ball has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ball has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.