Ball’s EPS Falls Short of Estimate (BLL) (CCK) (MINI) (SLGN)

Total revenue increased 3% year over year to $2.114 billion, ahead of the Zacks Consensus Estimate of $2.107 billion. Cost of sales edged up 1.6% year over year to $1.729 billion. Selling, general and administrative expenses increased 1.8% to $101 million in the reported quarter.

Segment Performance

Metal Beverage Packaging, Americas & Asia segment’s sales increased 1.9% year over year to $1.115 billion in the quarter. The growth was attributable to strong demand for specialty packaging in North America and Brazil. Operating earnings rose 15% to $138 million in the quarter as excellent operating performance offset increased manufacturing costs.

Sales from the Metal Beverage Packaging, Europe segment decreased 3% year over year to $437 million in the quarter. Strong demand for specialty containers, extruded aluminum aerosol packaging helped offset the impact of weak demand for beer. Operating earnings declined 7.8% to $37.8 million in the quarter due to unfavorable currency exchange movements.

Metal Food & Household Products Packaging, America segment sales declined 0.2% to $320 million. Operating earnings, however, improved a significant 118% to $28.6 million. The improvement was driven by improved manufacturing efficiencies across the segment's businesses, which nearly offset the negative impact of a disappointing 2012 vegetable harvest and lack of inventory holding gains from the prior year.

In the Aerospace and Technologies segment, sales increased 32% to $245 million. Operating earnings increased 34% to $24 million in the quarter. The segment had a backlog of $1 billion at the end of the quarter.

Fiscal 2012 Performance

Ball reported adjusted EPS of $3.06 in fiscal 2012, up 12% from $2.73 in fiscal 2011, but missed the Zacks Consensus Estimate of $3.08. Including one-time items, EPS in the reported fiscal stood at $2.57, down 2.7% from the year-ago EPS of $2.64.

Revenues stood at $8.736 billion, up 1.2% from $8.63 billion in 2011, ahead of the Zacks Consensus Estimate of $8,731 billion.

Financial Condition

Cash and cash equivalents were $174 million as of 2012 end compared with $166 million as of 2011 end. Long-term debt amounted to $3.1 billion as of 2012 end, compared with $2.7 billion as of 2011 end. Cash flow from operating activities was $853 in 2012 versus $948 million in 2011. Free cash flow generated during the year was $548 million compared with $505 million in the prior fiscal.

Ball announced a 30% hike in the company's quarterly cash dividend to 13 cents per share. The increased dividend will be paid on Mar 15 to shareholders of record as of Mar 1.

Outlook

The company expects free cash flow of approximately $450 million as spending for certain growth investments announced but not completed in 2012 will shift into 2013, including capacity to produce specialty containers in North America and Brazil. It plans to reduce expenses and focus on growth opportunities in order to sustain the weak global economic conditions. The company remains focused on attaining its long-term goal of 10% to 15% earnings per share growth. Moreover, weak economic condition in Europe will be a headwind in the upcoming quarters.

Broomfield, Colorado-based 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 and commercial customers. Ball Corp. retains a short-term Zacks Rank #3 (Hold). Another company in the same industry, Mobile Mini, Inc. (MINI) will announce its results on Feb 22. The Zacks Consensus Estimate is at 89 cents, projecting 16.7% year-over-year growth.

Peer Performance

Silgan Holdings Inc. (SLGN) reported record adjusted EPS of $2.70 in fiscal 2012, up 3% from $2.63 in fiscal 2011 and a penny ahead of the Zacks Consensus Estimate. Crown Holdings Inc. (CCK) reported EPS of $2.81 in fiscal 2012, flat year over year, and missing the Zacks Consensus Estimate of $2.84.