Ball Corporation (BLL) reported fourth-quarter 2014 adjusted earnings of 84 cents per share, down 2% from 86 cents per share earned in the year-ago quarter. Strong manufacturing performance and a lower tax rate were offset by flat demand for global metal packaging and unfavorable currency translation. Earnings also lagged the Zacks Consensus Estimate by a penny.
On a reported basis, earnings came in at 54 cents per share, compared with 85 cents in the prior-year quarter.
Operational Update
Total revenues edged up 2% year over year to $2.032 billion in the reported quarter. However, revenues beat the Zacks Consensus Estimate of $1.98 billion.
Cost of sales increased 3% year over year to $1.64 billion. Gross profit declined 3.7% year over year to $395.5 million and gross margin contracted 110 basis points (bps) to 19.5%.
Selling, general and administrative expenses went up 15.7% year over year to $124.3 million. Adjusted operating income declined 11.9% to $200 million from $227 million in the year-ago quarter. Consequently, operating margin contracted 160 bps to 9.8%.
Segment Performance
The Metal Beverage Packaging, Americas & Asia segment revenues remained flat at $1 billion in the reported quarter. Operating earnings went down 9% year over year to $134 million.
Specialty project start-up costs, timing of certain contractual payments in Brazil and lower-than-expected demand in China led to weaker results.
Sales from the Metal Beverage Packaging, Europe segment were $398.5 million in the reported quarter, down 6.8% year over year. Operating earnings declined 24% year over year to $29.9 million owing to higher aluminum premiums, unfavorable currency translation and low-single-digit volume declines due to lower exports outside of Europe.
The Metal Food & Household Products Packaging segment sales were $345 million, flat year over year. Operating earnings also fell 4.6% year over year to $35 million because of the shutdown of its operations at Danville, IL, steel aerosol manufacturing plant, and lower steel food can production and workforce reduction at its Oakdale, CA, facility during the quarter.
In the Aerospace and Technologies segment, sales grew 13% year over year to $251.3 million. Operating earnings, however, decreased 6.4% year over year to $23.5 million. The segment reported a backlog of $765 million.
Financial Condition
Ball Corporation had cash and cash equivalents of $191.4 million at the end of 2014 compared with $416 million at 2013 end. The company generated cash flow from operations of $1012.5 million in 2014 compared with $839 million in 2013. The company’s long-term debt decreased to $3 billion as of Dec 31, 2014 from $3.2 billion as of Dec 31, 2013.
2014 Performance
Ball Corporation posted adjusted earnings of $3.88 per share for 2014, which increased 18.3% from $3.28 a share in 2013. Earnings, however, missed the Zacks Consensus Estimate by a penny. Including special items, earnings were $3.30 per share for the year, compared with $2.73 in 2013.
Revenues for the full year increased 1.2% year over year to $8.57 billion from $8.47 billion in 2013. Revenues beat the Zacks Consensus Estimate of $8.52 billion.
Outlook
Ball Corporation expects 2015 free cash flow to be roughly in line with the $620 million reported in 2014. The company has maintained its long-term earnings per share growth goal of 10–15%.
Our Take
Ball Corporation will continue to benefit from its continuous focus on cost containment. Product launches and expansion in the emerging markets will also drive growth.
In Metal Beverage Packaging, Americas & Asia, the company will introduce its second-generation aluminum bottle shaping technology in North America late in the first quarter of 2015. Further, the company is scheduled to begin a third production line to manufacture specialty cans at its existing Oss, Netherlands, facility in the second quarter of 2015 that will drive growth in the Metal Beverage Packaging, Europe segment.
Ball Corporation also continues to make investments in Europe, India and North America to meet persistent strong demand for aerosol containers and other value-added products.
The company successfully launched WorldView-3, the first multi-payload, super-spectral, high-resolution commercial satellite during the reported quarter. The Aerospace segment continues to pursue non-traditional growth projects while leveraging its existing capabilities in the government sector.
However, uncertainty in the global economic scenario remains a headwind. Moreover, manufacturing challenges and tough volume comparisons will remain areas of concern for Ball Corporation.
Broomfield, CO-based Ball Corporation is the largest manufacturer of beverage cans in North America. It also supplies aerospace as well as other technologies and services to the government and commercial customers.
Currently, Ball Corporation has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Abengoa SA (ABGB), AO Smith Corp. (AOS) and Briggs & Stratton Corporation (BGG). All these stocks carry a Zacks Rank #1 (Strong Buy).
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