On Tuesday, RBC Capital made a significant adjustment to its outlook on Ball Corp (NYSE: NYSE:BALL), upgrading the stock from Sector Perform to Outperform, and raising the price target to $74 from the previous $61. This move came after Ball Corp completed the divestiture of its Aerospace division to BAE Systems (LON:BAES), a transaction that brought in approximately $4.5 billion in after-tax cash proceeds.
The sale's proceeds are earmarked for specific strategic financial moves, with $2 billion allocated for debt reduction and another $2 billion for share repurchases. RBC Capital's positive stance is rooted in the belief that this sale will enable Ball Corp's management to concentrate on its core beverage can business and will likely lead to an increase in free cash flow (FCF).
The analyst notes that FCF is anticipated to benefit from a significant reduction in capital expenditures, which are expected to decrease to around $650 million in the years 2024 and 2025, down from approximately $1 billion in 2023. This financial maneuvering is seen as a catalyst for Ball Corp's future performance.
In addition to the financial restructuring following the sale, Ball Corp is preparing to present further details about its operations and strategy to investors. The company has scheduled an investor day for June 18, which will take place in New York City. This event is set to provide additional insights into the company's plans following the divestiture and its focus on its core business segments.
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