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Packaging manufacturer Ball (NYSE:BLL) fell short of analysts' expectations in Q2 CY2024, with revenue down 17% year on year to $2.96 billion. It made a non-GAAP profit of $0.74 per share, improving from its profit of $0.61 per share in the same quarter last year.
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Ball (BALL) Q2 CY2024 Highlights:
- Revenue: $2.96 billion vs analyst estimates of $3.10 billion (4.5% miss)
- EPS (non-GAAP): $0.74 vs analyst estimates of $0.70 (5.2% beat)
- Gross Margin (GAAP): 20.3%, up from 18.2% in the same quarter last year
- Free Cash Flow of $146 million is up from -$1.40 billion in the previous quarter
- Market Capitalization: $19.81 billion
Started with a $200 loan in 1880, Ball (NYSE:BLL) manufactures aluminum packaging for beverages, personal care, and household products as well as aerospace systems and other technologies.
Industrial PackagingIndustrial packaging companies have built competitive advantages from economies of scale that lead to advantaged purchasing and capital investments that are difficult and expensive to replicate. Recently, eco-friendly packaging and conservation are driving customers preferences and innovation. For example, plastic is not as desirable a material as it once was. Despite being integral to consumer goods ranging from beer to toothpaste to laundry detergent, these companies are still at the whim of the macro, especially consumer health and consumer willingness to spend.
Sales GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Unfortunately, Ball's 2.1% annualized revenue growth over the last five years was weak. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Ball's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 7.8% annually. Ball isn't alone in its struggles as the Industrial Packaging industry experienced a cyclical downturn, with many similar businesses seeing lower sales at this time.
This quarter, Ball missed Wall Street's estimates and reported a rather uninspiring 17% year-on-year revenue decline, generating $2.96 billion of revenue. Looking ahead, Wall Street expects revenue to decline 2.7% over the next 12 months.
Operating MarginBall has done a decent job managing its expenses over the last five years. The company has produced an average operating margin of 8.7%, higher than the broader industrials sector.
Looking at the trend in its profitability, Ball's annual operating margin rose by 3.5 percentage points over the last five years, showing its efficiency has improved.
This quarter, Ball generated an operating profit margin of 15.6%, up 6.6 percentage points year on year. This increase was solid, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as sales, marketing, R&D, and administrative overhead.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Ball's EPS grew at an unimpressive 6.2% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 2.1% annualized revenue growth and tells us the company became more profitable as it expanded.
Diving into the nuances of Ball's earnings can give us a better understanding of its performance. As we mentioned earlier, Ball's operating margin expanded by 3.5 percentage points over the last five years. On top of that, its share count shrank by 8.7%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Ball, its two-year annual EPS declines of 7% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.
In Q2, Ball reported EPS at $0.74, up from $0.61 in the same quarter last year. This print beat analysts' estimates by 5.2%. Over the next 12 months, Wall Street expects Ball to grow its earnings. Analysts are projecting its EPS of $3.03 in the last year to climb by 7.4% to $3.25.
Key Takeaways from Ball's Q2 ResultsIt was good to see Ball beat analysts' EPS expectations this quarter. On the other hand, its revenue unfortunately missed. Overall, this was a bad quarter for Ball. The stock remained flat at $63.83 immediately following the results.
