Analyst Drops Bearish Ball Corp. Thesis After EPS, Sales Beat

Ball Corporation BLL reported fourth quarter results Feb. 7 with a top-and-bottom-line beat.

The Analyst

KeyBanc Capital Markets' Adam Josephson upgraded Ball's stock rating from Underweight to Sector Weight with no assigned price target.

The Thesis

Ball's Q4 earnings report was "impressive," with "exceptionally good" performance in South America and "good performance" in Europe, Josephson said in the upgrade note.

The results also signaled challenging fundamentals in certain cases — for example, the U.S. beverage and food can segment declined and competition in Brazil will remain heightened in 2018 and 2019, the analyst said. 

Given a few challenges ahead, KeyBanc is modeling Ball's 2018 adjusted EBITDA at $1.84 billion, which does represent an increase from a prior estimate of $1.75 billion. The figure is also modestly below the company's implied guidance and the consensus estimate of around $1.875 billion.

Ball's stock has fallen 7 percent since Josephson downgraded to Underweight Dec. 8. Following the weakness, the stock is trading at a 10-percent premium to its packaging peers on an EV/EBITDA basis compared to 15 percent at the time of the downgrade and a 17-percent historical premium over the past five years, according to KeyBanc. 

Price Action

Ball Corp. shares were trading up slightly midday Monday at $37.95. 

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