Ball Corporation (BLL) reported third-quarter 2013 adjusted earnings of $1.00 per share, up 11% from the year-ago adjusted earnings of 90 cents per share. The results also beat the Zacks Consensus Estimate of 93 cents. The year-over-year growth in earnings was led by better-than-expected global beverage can volumes and an improved seasonal vegetable harvest.
Including after-tax charges of 22 cents a share, related to a provision for customer receivable, business consolidation and other costs, the company reported earnings from continuing operations of 78 cents per share. This compared to earnings per share of 74 cents in the year ago quarter.
Operational Update
Total revenue remained flat in the third quarter at $2.28 billion from the year-ago quarter. Revenues marginally exceeded the Zacks Consensus Estimate of $2.27 billion.
Cost of sales decreased 1% year over year to $1.8 billion. Gross profit grew 3.5% year over year to $431 million, and gross margin expanded 70 basis points (bps) to 18.9%.
Selling, general and administrative expenses increased 14.7% year over year to $99 million. Adjusted operating income remained flat at $255.4 million compared to the year- ago quarter. Consequently, operating margin remained at 11.2%, flat with the prior-year quarter.
Segment Performance
The Metal Beverage Packaging, Americas & Asia segment reported revenues of $1.1 billion in the reported quarter compared with $1.2 billion in the year-ago quarter. Operating earnings decreased 5% year over year to $134.8 million. The segment’s performance was affected by ceased production of 12-ounce beverage containers in the North American facility, but was partially offset by volume growth in specialty containers.
Sales from the Metal Beverage Packaging, Europe segment increased 8.5% year over year to $488.9 million. Operating earnings also rose 11% year over year to $60.5 million, led by stronger-than-expected volume growth, improved operating efficiencies and progress on cost-out initiatives.
The Metal Food & Household Products Packaging segment sales went up 4% year over year to $463.6 million. Operating earnings increased 16.6% to $58.4 million from the year ago quarter, driven by double-digit volume growth.
In the Aerospace and Technologies segment, sales declined 1% year over year to $217.5 million. Consequently, operating earnings decreased 20% year over year to $18 million. The segment had a backlog of $942 million at the end of the quarter.
Financial Condition
Cash and cash equivalents were $168.2 million as of Sep 30, 2013 compared with $181.2 million as of Sep 30, 2012. Long-term debt amounted to $3.4 billion as of Sep 30, 2013, up from $2.9 billion as of Sep 30, 2012. Cash flow from operating activities for the nine-month period went up 16.4% year over year to $451.9 million from $388.3 million in the year-ago comparable period.
Outlook
Ball Corporation retained its guidance of free cash flow of $450 million for full-year 2013, after capital expenditures of approximately $400 million. The company expects net full-year share buyback to be around $400 million.
Our Take
The company will continue to benefit from product launches, expansion into emerging markets and strong backlog in its aerospace and technologies segment. Strong free cash flow, dividends and share repurchases are also expected to generate long-term shareholder value.
Moreover, the company sees growth potential in many segments. Metal beverage packaging, Americas & Asia will benefit from the Alagoinhas plant's third production line, which is on track. However, uncertainty in the global economic scenario remains a headwind.
Broomfield, Colo.-based Ball Corporation is the largest manufacturer of beverage cans in North America. It also supplies aerospace and other technologies and services to the government and to commercial customers.
Ball Corporation currently retains a short-term Zacks Rank #3 (Hold). Mobile Mini, Inc. (MINI) also belongs to the containers-metal/glass industry and holds a Zacks Rank #2 (Buy).
Another company belonging to the same industry, Silgan Holdings Inc. (SLGN) posted adjusted earnings of $1.23 per share in the third quarter, up 5.1% year over year, but missed the Zacks Consensus Estimate of $1.31. Ball’s peer EveryWare Global, Inc. (EVRY) is yet to announce its third-quarter results. The Zacks Consensus Estimate for EveryWare currently stands at 14 cents for the third quarter.
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