Ball Corporation (BLL) reported third-quarter 2013 adjusted earnings of 86 cents per share, which beat the Zacks Consensus Estimate of 73 cents. Moreover, the reported figure was up 34% from the year-ago quarter.

On a reported basis, earnings came in at 85 cents per share, compared with 39 cents in the prior-year quarter.

Operational Update

Total revenue declined 4.7% year over year to $2 billion from $2.1 billion in the year-ago quarter. Revenues also fell short of the Zacks Consensus Estimate of $2.09 billion.

Cost of sales decreased 8.3% year over year to $1.5 billion. Gross profit grew 6.7% year over year to $410.7 million and gross margin expanded 200 basis points (bps) to 20%.

Selling, general and administrative expenses increased 6.3% year over year to $107.4 million. Adjusted operating income remained increased 7.5% to $227 million from $211.1 million in the year-ago quarter. Consequently, operating margin grew 100 bps to 11%.

Segment Performance

The Metal Beverage Packaging, Americas & Asia segment reported revenues of $1 billion in the reported quarter, compared with $1.1 billion in the year-ago quarter. However, operating earnings grew 6.7% year over year to $147.3 million. The segment’s performance was driven by favorable contribution of the second production line in Alagoinhas, Brazil and the relocation of the Shenzhen plant to the company's existing Foshan plant to maximize efficiencies. These positives, however, were partially offset by volume growth in specialty containers.

Sales from the Metal Beverage Packaging, Europe segment increased 8.4% year over year to $427.8 million. Operating earnings also rose 33% year over year to $39.4 million in the quarter, led by strong demand for beverage containers across the region and progress on cost-out initiatives.

The Metal Food & Household Products Packaging segment sales went down 4.9% year over year to $345.2 million. Operating earnings remained flat at $36.8 million in the reported compared to the year ago quarter.

In the Aerospace and Technologies segment, sales declined 9.3% year over year to $222.1 million. Operating earnings on the other hand, increased 3.7% year over year to $25.1 million.

Financial Condition

Ball Corporation ended 2013 with cash and short-term investments of $416 million, up from $174 million in 2012. The company’s total debt increased to $3.6 billion as of Dec 31, 2013 from $3.3 billion as of Dec 31, 2012.

Total cash flow from operating activities was $839 million in 2013 versus $853 million in 2012. Free cash flow was $461 million for the full year 2013 as against $548 million in 2012.

The Board of Ball Corporation has sanctioned a stock repurchase program on Jan 29, which allows the company to buy back up to 20 million shares. In addition, the company declared a quarterly cash dividend of 13 cents per share.

Fiscal 2013 Performance

For full-year 2013, Ball Corporation reported adjusted earnings per share (EPS) of $3.28, up 7.1% from $3.06 in 2012. The results outperformed the Zacks Consensus Estimate of $3.15. Including one-time items, EPS was $2.73 as compared with $2.55 per share in the prior year.

Revenues for the year 2013 decreased 2.2% year over year to $8.5 billion. Revenues were in line with Zacks Consensus Estimate.

For the full year, Aerospace and Technologies segment had a backlog of $938 million.

Outlook

Ball Corporation expects free cash flow range of $550 million for full-year 2014, after capital expenditures of approximately $375 million. The company has maintained its long-term diluted earnings per share growth goal of 10%–15%.

Our Take

The company will continue to benefit from product launches, expansion into emerging markets and strong backlog in its aerospace and technologies segment. Strong free cash flow, dividends and share repurchases are also expected to generate long-term shareholder value.

Moreover, the company sees growth potential in many segments. Metal beverage packaging, Americas & Asia will benefit from the Alagoinhas plant's third production line, which is on track. However, uncertainty in the global economic scenario remains a headwind.

Broomfield, Colorado-based Ball Corporation is the largest manufacturer of beverage cans in North America. It also supplies aerospace as well as other technologies and services to the government and customers.

Ball Corporation currently has a short-term Zacks Rank #2 (Buy). Among the company’s peers, Crown Holdings Inc. (CCK) and Mobile Mini, Inc. (MINI) are yet to announce their fourth-quarter results.

Another company of the same industry, Silgan Holdings Inc. (SLGN) posted adjusted earnings of 45 cents in the fourth quarter of 2013, down 4.2% year over year. Moreover, the reported figure lagged the Zacks Consensus Estimate of 49 cents.

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