EMEA Packaging And South American Markets Will Drive Future Success

Key Takeaways

• Global aluminum packaging shift and strategic expansions in key regions are set to drive notable volume and revenue growth for Ball Corporation.
  
• Aggressive share repurchases and operational efficiencies are anticipated to enhance earnings per share and sustain net margins.
  
• Potential economic slowdown and reliance on non-alcoholic segments may pressure revenue, while geopolitical and operational challenges pose risks to growth and earnings.

Catalysts

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

• The ongoing global shift towards aluminum packaging in EMEA and the strategic capacity expansions in this region are likely to drive mid-single-digit volume growth, positively impacting Ball Corporation's revenue and margins.
  
• Recovery in key South American markets, such as Argentina and Chile, along with anticipated growth in Brazil, is expected to drive volume growth beyond historical levels, potentially increasing revenue and operating earnings.
  
• The strategic formation of Oasis Venture Holdings and the aluminum cups business expansion holds long-term potential for volume and revenue growth.
  
• Aggressive share repurchase plans, with $1.3 billion worth of shares to be bought back in 2025, are likely to support significant earnings per share (EPS) growth.
  
• Improvements in operational efficiencies and cost management, particularly through the Ball Business System, are expected to sustain or slightly expand net margins across various regions.

Ball Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Ball's revenue will grow by 3.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.4% today to 8.1% in 3 years time.
• Analysts expect earnings to reach $1.1 billion (and earnings per share of $4.05) by about May 2028, up from $527.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $950 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.4x on those 2028 earnings, down from 27.7x today. This future PE is lower than the current PE for the US Packaging industry at 20.2x.
• 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 6.66%, as per the Simply Wall St company report.

Ball Future Earnings Per Share Growth

Risks

• Potential economic slowdown in North America, as Ball is closely monitoring end consumer health, which could impact overall demand and volume growth. This uncertainty may affect revenue and margins.
  
• Geopolitical dynamics and tariff developments, particularly relating to China, may create unpredictable impacts on volume growth and could present risks to revenue and earnings.
  
• The previously strong performance in the North American beer segment appears under pressure with ongoing challenges and could be further pressured by changes in consumer behavior, impacting revenue.
  
• Execution risks in managing operational efficiencies and supply/demand balance, particularly in Europe where the market is getting tight, could affect operating earnings and net margins.
  
• The reliance on non-alcoholic energy drinks to offset other pressures, if these segments face innovation or market acceptance challenges, could affect Ball's revenue and volume growth assumptions.

Valuation

• The analysts have a consensus price target of $59.709 for Ball based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $83.0, and the most bearish reporting a price target of just $44.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $13.1 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 15.4x, assuming you use a discount rate of 6.7%.
  
• Given the current share price of $51.68, the analyst price target of $59.71 is 13.4% 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.