Ball Corp. 8-K Clears Confusion, Provides Buying Opportunity

On Friday, Ball Corporation BLL explained in an 8-K that the post-Rexam close leverage of 4.5x doesn't include $300 million in synergies. The confusion drove shares lower on Friday and continued Tuesday afternoon, with shares down 1.6 percent at $70.25 on the day.

Jefferies analysts believe this pullback provides a buying opportunity for shareholders for a number of reasons.

Reiterating that Ball is one of the firm's top picks, they believe the 8-K offered more visibility into the "choppy macro backdrop" from Rexam synergies. Jefferies noted that for every 100 basis points greater than 9 percent AT hurdle rate would provide $70 million in earnings before interest & tax. Noting that Ball management is being conservative with guidance, Jefferies believes the 3x leverage target in 2018 by management, would allow the company to revisit a buyback program in late 2017 or early 2018.

Jefferies reiterating their Buy rating and $86 price target.