It’s like they all saw the same thing at the same time. After years of selling, seven insiders at Ball Corporation (BLL) rushed into the aluminum packaging company’s stock. In the last half-decade, insiders sold more than $82 million of Ball stock compared to nearly $2.5 million in purchases.
A big chunk of the $2.5 million came last week as the seven combined to buy 22,000 shares for a total of $1.98 million. (1) We call it a cluster buy when more than two insiders invest at the same time. The BLL transactions are also a “change of heart” in our book considering previous transactions were mostly an uninterrupted river of selling.
Ball has been in operation since 1880 and has a variety of sectors that it serves. Ball Corporation supplies innovative, sustainable aluminum packaging solutions for beverage, personal care, and household products’ customers, as well as aerospace and other technologies and services primarily for the U.S. government.
Ball recently reported better than expected earnings and sales for its second quarter. Wall Street expected $3.23 billion in revenue and earnings per share (EPS) of $0.83. Management delivered EPS of $0.86, a bullish surprise of $0.03 per share, with sales of $3.46 billion. (2)
Beyond buying the stock, executives were optimistic about Ball’s prospects. Chief Financial Officer (CFO) Scott C. Morrison told shareholders, “The company is well-positioned for long-term growth, and we recently accelerated return of value to shareholders in 2021 by increasing our dividend 33% and initiating share repurchases of at least $500 million.”
Morrison went on, “We look forward to investing in more organic growth opportunities and returning even more to our shareholders in the future as our cash from operations continues to accelerate.”
Chief Executive Officer (CEO) and Chairman John A. Hayes added to the bullishness, “In 2021 and beyond, we look forward to growing our cash from operations and EVA dollars on an even larger capital base while returning capital to our shareholders and exceeding our long-term diluted earnings per share growth goal of at least 10 to 15%. (3)
Wall Street is growing more bullish on BLL stock as well. Eleven of the 18 analysts covering the Consumer Cyclical increased their 2022 earnings estimates within the last seven days. (4) A month ago, the 2022 bottom-line consensus EPS forecast was $4.05. Today, it stands at $4.18. The topline is forecasted to grow more than 8% to $14.73 billion.
The typical Ball industry peer is valued at 18.6 times earnings (P/E) and 3.1 times sales (P/S). If BLL hits Wall Street’s 2022 targets and trades at the industry averages, shares would price out at $77.75 and $139.81, based on P/E and P/S respectively. As we type, BLL trades at $94.71 with an $0.80 annual dividend.
Outlook: Ball Corporation’s (BLL) management’s enthusiasm in terms of words with actions (cluster buying) and better than expected financial results, suggest Ball’s business is firing on all cylinders. Although, shares could have some downside exposure based on the industry’s average Price to Earnings ratio and BLL’s 2022 consensus earnings.
Ball could be appropriate for investors with average risk tolerance seeking exposure to Packaging & Containers companies.
1 – https://www.secform4.com/insider-trading/9389.htm
2 – https://finance.yahoo.com/news/ball-corporation-shares-soar-upbeat-060111629.html
3 – https://investors.ball.com/news-and-presentations/news-releases/news-releases-details/2021/Ball-Reports-Strong-Second-Quarter-2021-Results/default.aspx
4 – https://finance.yahoo.com/quote/BLL/analysis?p=BLL