Ball's (BLL) Making Smart Moves to Capitalize on Emerging Markets - Barron's
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Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
Rating Summary:
13 Buy, 12 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 12 | Down: 15 | New: 40
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Ball Corp. (NYSE: BLL) should see a surge in demand as emerging markets begin to solidify and demand to drink from cans rather than non-branded bottles drives sales.
According to Barron's, Ball derives about 91 percent of revenue from its metal-packing business. The company recently added capacity to the division in Brazil and Serbia, and some analysts believe Ball should be able to ramp up new lines in Vietnam, Brazil, and China with limited set backs.
Emerging markets offer better margins for Ball due to better pricing power, unlike the North American market, which is dominated by just a few beverage names.
Further, Ball's aerospace backlog is now over $1 billion.
The 13 percent rise in Ball's stock price over the last six-months stems from gains in emerging markets. The move outpaces the 4.5 percent seen for S&P 500, but slightly lags the DJ U.S. Containers & Packaging index, which moved 14 percent higher over the same period.
Shares are valued at 13.5x forward earnings, similar to peers Crown Holdings (NYSE: CCK) and Rexam (OTCBB: REXMY).
Ball generates plenty of free cash flow, which could be put toward M&A or buybacks.
Still getting the lions share of its sales from North America, Ball is also making smart moves in rapidly growing emerging markets. It operates a joint venture in Brazil called Latapack-Ball Embalagens. Ball recently paid $46.2 million for an additional 10.1 percent interest in the JV, bringing its total stake to roughly 60 percent. Sales for Latapack-Ball Embalagens in 2010 were $360 million, just a fraction of its $7.6 billion in total sales, but the stake may prove lucrative in the burgeoning Brazilian market. One Deutsche Bank analyst is modeling for sales of 5.3 billion cans in the region, amounting to about $500 million in sales for 2012.
Moving across the Pacific, China is the world's largest beer market, a Jefferies analyst notes, but only about 4 percent of its beer is sold in metal cans suggesting plenty of upside potential.
Finally, in Europe, Ball's acquisition of Aerocan should bode well for it, considering Aerocan had margins of 17.5 percent in the first quarter amid a solid structure and strong pricing power. Demand for aerosol cans is expected to be in the low teens.
One analyst from KeyBanc suggests Ball will see growth of 25 percent in 2011 and 15 percent for 2012.
According to Barron's, Ball derives about 91 percent of revenue from its metal-packing business. The company recently added capacity to the division in Brazil and Serbia, and some analysts believe Ball should be able to ramp up new lines in Vietnam, Brazil, and China with limited set backs.
Emerging markets offer better margins for Ball due to better pricing power, unlike the North American market, which is dominated by just a few beverage names.
Further, Ball's aerospace backlog is now over $1 billion.
The 13 percent rise in Ball's stock price over the last six-months stems from gains in emerging markets. The move outpaces the 4.5 percent seen for S&P 500, but slightly lags the DJ U.S. Containers & Packaging index, which moved 14 percent higher over the same period.
Shares are valued at 13.5x forward earnings, similar to peers Crown Holdings (NYSE: CCK) and Rexam (OTCBB: REXMY).
Ball generates plenty of free cash flow, which could be put toward M&A or buybacks.
Still getting the lions share of its sales from North America, Ball is also making smart moves in rapidly growing emerging markets. It operates a joint venture in Brazil called Latapack-Ball Embalagens. Ball recently paid $46.2 million for an additional 10.1 percent interest in the JV, bringing its total stake to roughly 60 percent. Sales for Latapack-Ball Embalagens in 2010 were $360 million, just a fraction of its $7.6 billion in total sales, but the stake may prove lucrative in the burgeoning Brazilian market. One Deutsche Bank analyst is modeling for sales of 5.3 billion cans in the region, amounting to about $500 million in sales for 2012.
Moving across the Pacific, China is the world's largest beer market, a Jefferies analyst notes, but only about 4 percent of its beer is sold in metal cans suggesting plenty of upside potential.
Finally, in Europe, Ball's acquisition of Aerocan should bode well for it, considering Aerocan had margins of 17.5 percent in the first quarter amid a solid structure and strong pricing power. Demand for aerosol cans is expected to be in the low teens.
One analyst from KeyBanc suggests Ball will see growth of 25 percent in 2011 and 15 percent for 2012.
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