Ball Corp. Packages Shareholder Friendliness

By Ryan C. Fuhrmann | February 01, 2012 AAA

Metals packaging firm Ball Corp (NYSE:BLL) supplies metal containers and bottles to leading food, beverage and consumer goods firms across the globe. It also serves a growing number of aerospace and technology businesses. Combined, its operations have posted surprisingly consistent growth over the past decade and management has plans for more of the same in the coming 10-year period.

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Full-Year Recap
Net sales advanced 13.1% to $8.6 billion. Every business segment reported positive growth. The largest remained the beverage packaging operations in the American and Asian regions, which reported 14.7% growth to account for just over 51% of total sales. The European packaging unit was the next largest at just over 23% of sales. It grew 18.7% for the year and 10.4% for the fourth quarter, avoiding the economic turmoil that sovereign debt worries are causing in Europe. Food and household packaging in the Americas was the third largest segment at roughly 16% of sales, and grew a modest 4.1%. Aerospace and technologies made up the remaining 10% of sales and also grew close to 10%.

Three of four segments reported operating profit gains. The only laggard was food and household packaging in the Americas, which experienced a 10.6% decline to $131.8 million. The remaining units posted profit growth in the high single to low double digits. Total company operating profit advanced 9.5% to $836.9 million, or an operating profit margin of nearly 10% of sales.

A more than $100 million decline in the equity value of affiliated companies contributed in sending net income down 5.1% to $444 million, but share buybacks helped boost per-share earnings back into positive territory at 3.1% as earnings reached $2.63 per diluted share. (To know more about income statements, read Understanding The Income Statement.)

Analysts currently project modest 2012 sales growth of roughly 3% and total sales of nearly $9 billion. They expect earnings of $3.08 per share, or annual growth of about 13%.

The Bottom Line
Ball's metal packaging operations may appear cyclical at first glance, but its primary customer base is relatively recession-resistant as it contains leading beverage, food and household products companies. Major customers include Coca-Cola (NYSE:KO), PepsiCo (NYSE:PEP), Molson Coors Brewing (NYSE:TAP) and likely Boeing (NYSE:BA) in the aerospace unit. Aerospace is clearly more cyclical, but is a smaller segment that still represents a solid growth avenue and opportunities to diversify Ball's revenue stream.

Sales condensed slightly during the credit crisis, but profits grew steadily. Over the past three-, five- and 10-year timeframes, Ball has consistently leveraged single-digit annual sales growth into double-digit profit growth. The dividend yield is modest at 1%, but management did recently increase it by 43%. In another attempt to boost shareholder value, it also frequently repurchases shares.

The stock has rallied recently, which has boosted the forward P/E to close to 12. However, this is still quite reasonable given the solid growth Ball posts, and it has plans for steady growth in developed and emerging markets in the coming decade. (For additional reading, check out 5 Must-Have Metrics For Value Investors.)

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At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

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