Rising Sustainability Trends And Expanded Capacity Will Boost Aluminum Demand

Key Takeaways

• Shifting from plastics to aluminum and investing in production expansion are driving strong, sustainable growth and improved margins globally.
  
• Focusing on specialty cans and divesting aerospace boosts premium pricing, enhances business mix, and enables ongoing capital returns.
  
• Shifting consumer preferences, regulatory pressures, and reliance on major beverage clients threaten Ball's long-term growth, profitability, and efficient use of expanded production capacity.

Catalysts

Supplies aluminum packaging products for the beverage, personal care, and household products industries in the United States, Brazil, and internationally.

• Accelerating consumer and brand movement away from plastic to aluminum packaging, driven by sustainability concerns and regulatory pressures, is fueling a multi-year volume inflection for Ball. This structural shift is expected to underpin above-market revenue growth globally, particularly as aluminum can penetration in regions like Europe and emerging markets lags well behind other developed markets.
  
• Strategic capital investment in new and expanded production capacity—especially recent multiyear investments in European plants and the integration of Florida Can in North America—is positioning Ball to meet surging demand efficiently, supporting both topline growth and future margin expansion as utilization rates climb.
  
• The company’s intensifying focus on higher-value specialty can formats and innovative product offerings in categories like resealable and unique-shaped cans enables Ball to capture premium pricing and margin uplift, with mix improvements increasingly contributing to net margin growth.
  
• Exit from the aerospace division and a sharpened focus on core packaging has materially strengthened the business mix and unlocked cash flow, allowing for substantial share repurchases and ongoing capital investments that are expected to drive accelerated earnings-per-share growth and consistent free cash flow generation.
  
• Tightening market capacity in key geographies, combined with disciplined industry supply additions and Ball’s expanding long-term contracts, is creating a favorable supply-demand dynamic. This backdrop allows for high asset utilization, reinforces pricing power, and supports sustained earnings outperformance among leading players.

Ball Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Ball compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Ball's revenue will grow by 5.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.4% today to 8.8% in 3 years time.
• The bullish analysts expect earnings to reach $1.3 billion (and earnings per share of $4.91) by about July 2028, up from $527.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 16.5x on those 2028 earnings, down from 31.4x today. This future PE is lower than the current PE for the US Packaging industry at 27.7x.
• Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.84%, as per the Simply Wall St company report.

Ball Future Earnings Per Share Growth

Risks

• The rise of alternative sustainable packaging materials such as bioplastics and compostables may lead to a long-term decline in demand for aluminum cans, which would limit revenue growth for Ball if customer preferences shift significantly over the coming years.
  
• Slowing global population growth and flattening consumption of beverages in developed markets could cap the volume growth opportunities for Ball's core segments, directly constraining both revenue and earnings expansion over time.
  
• Ball’s high exposure to a concentrated customer base of major beverage brands puts its pricing power and contract terms at risk; if these large clients negotiate harder or shift production in-house, Ball could face downward pressure on both gross margins and long-term revenue stability.
  
• The company continues to undertake substantial capital expenditures for capacity expansion and plant modernization, but if actual beverage can demand fails to materialize to match this added capacity, Ball risks underutilized assets, increased depreciation, and lower returns on invested capital, all of which could negatively impact net earnings.
  
• Increasing regulatory scrutiny, including extended producer responsibility laws and stricter packaging waste regulations, is likely to impose higher compliance and operational costs on Ball’s metal packaging products, which could erode net margins and diminish long-term profitability.

Valuation

• The assumed bullish price target for Ball is $76.05, which represents two standard deviations above the consensus price target of $63.54. This valuation is based on what can be assumed as the expectations of Ball's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $78.0, and the most bearish reporting a price target of just $54.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $14.2 billion, earnings will come to $1.3 billion, and it would be trading on a PE ratio of 16.5x, assuming you use a discount rate of 6.8%.
• Given the current share price of $59.7, the bullish analyst price target of $76.05 is 21.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.