Is Ball Corp Stock A Buy?

Ball Corporation (NYSE:BLL) is well known by any seasoned home cook. Ball brand mason jars and canning supplies are the most trusted brand in their niche. Everyone making anything from pickles and preserves trusts these jars, which skyrocketed in price when “stay-at-home” orders were enacted.

But it only licenses its name to Newell Brands, which manufactures and sells the actual products, which invites the question is Ball Corp stock a Buy?

The company still earns a licensing fee from sold jars, and there’s no denying it has brand recognition. It also creates a wide variety of aluminum and steel packaging products made from its metal recycling operations.

And it went on a spending spree last year by shelling out $80 million on Brazilian business Tubex E Comercio de Embalagens Ltda. It then bought the naming rights of Colorado’s Pepsi Center, which was renamed Ball Arena.

We pop open the lid on this mysterious and iconic company to assess whether it’s worth the price on the front of the jar.

Ball Corp Largest U.S. Aluminum Manufacturer

Ball Corporation is more than just a mason jar company. It’s known far beyond the home canning community. It also supplies metal packaging and cans for food, aerosol, and other products. And it has an aerospace division that produces spacecraft, sensors, and instruments systems among other items.

In fact, it’s creating an infinite recycling loop in which it creates the cans used for sodas, beers, energy drinks, and other drinks. It then turns around and recycles them to create more. The company has even purchased the original Coors can manufacturing plant in Golden, Colorado.

When the world turned topsy turvy, Ball’s cans were just as in-demand as the mason jars that bear its name. Everything from craft beers to sodas jumped in sales as restaurants and bar taps closed, leaving people to drink at home.

Over two-thirds of all beverage containers are aluminum, and Ball is the largest manufacturer in the U.S. This puts it at an advantage where it’s expanding to create two new plants in 2021 (one in Glendale, Arizona and one in Pittston, Pennsylvania).

Just because you’re buying its products, does that mean you should also buy Ball stock?

Is Ball Corp Stock A Buy?

Ball Corporation shines bright when it comes to revenue projections. Sequential revenue growth quarter after quarter bodes well for BLL share price.

However, BLL stock has had its ups and downs. It plummeted to a 52-week low of $51.26 at the onset of the stock market spike down. The share price slowly rebounded to former levels between $70 and $80 before sharply rising at the end of the year.

This was on the back of strong sales reported in its third quarter earnings report. The company reported $0.72 earnings per share (EPS), up from $0.27 in the same quarter of 2019.

Global beverage can volumes were up 9 percent in the quarter. It ended the quarter with $241 million in net earnings on $3.1 billion in sales.

Those results also include the company’s sale of its Argentine steel aerosol and Chinese beverage can assets in 2019. Its licensing from Ball mason jars and home canning makes up less than 10 percent of the company’s total revenues.

So what could crack the jar?

Will Ball Corp Stock Fall?

Ball Corporation made two big purchases in 2020, and that’s stifling much of its profits. Also, it can’t be said enough that the company doesn’t actually sell the Ball jars you see. That creates a brand disconnect that could one day harm the company.

Should other jars outperform them or they have a manufacturing defect, Ball will take the hit.

And the company’s business hinges entirely on the businesses it serves continuing to sell. Because it’s invested in the full recycling loop, hoarding keeps more metal off the market. That could strangle the company’s supply and ruin the virtuous cycle it’s creating by 2022.

It could fail to live up to its market cap and sustain the type of growth investors are expecting. In fact, 2019 and 2020 represented unprecedented growth on the back of the craft beer craze. Should consumers switch to glass over metal, the company will ironically lose out to products bearing its name.

Can Ball Corp Competitors Win?

It may be the biggest on the block, but Ball Corporation has plenty of competition. Crown Holdings (CCK) and Sealed Air (SEE) are among the companies making cans, and it’s going head-to-head with the likes of Boeing and Lockheed Martin in the aerospace division.

These competitors could find ways to undercut Ball’s supplies and bottleneck its growth potential through supply chain issues.

Aerospace is an especially competitive market in 2020 because the pandemic grounded all flights for a period. This put aerospace manufacturers in a pickle that Ball so far contained. It’s unclear how long its luck will last though.

Is Ball Corp Stock A Buy? The Bottom Line

Ball Corporation is a well-known brand name that doesn’t directly sell the the jars bearing its logo. However, the company’s core business of aluminum and other metal packaging has enjoy an unprecedented boom. That’s because panic shopping and stay-at-home orders forced consumers to buy “at-home” beverages.

It’s also fueled by the microbrew trend.

Restaurants and bars being shut down fueled the company’s growth, but it’s unclear how it will continue expanding when the world returns to normalcy. Hoarders could have taken a sizable amount of raw product off the market, putting a break in the company’s proposed infinite recycling loop.

However, if management hits its targets, BLL share price could be poised for continued growth over the next decade. So long as consumers still prefer aluminum cans over plastic and glass, Ball Corp has legs. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.