Editor's Note: Our Industrials analyst Jay Van Sciver added Ball Corp (BLL) as a top short idea on 9/22/19. Shares were trading around $75 at the time. The company reported last night and the news was obviously not good. Shares are down -6% to around $70 today.
Below is a brief note written by Van Sciver on 9/27 outlining his concerns about the company. If you are an institutional investor interested in accessing Jay's research email email@example.com.
FINALLY, SOME CATALYSTS IN SIGHT
The production of aluminum cans is a low/no growth, reasonably consolidated industry that used to be rated an ‘Okay, I guess’ by investors.
Over the past 18 months, however, shares of Ball (BLL) have moved to an excessive valuation, leaving behind other packaging companies. We’ll explore the reasons for this, like freight costs, and misperceptions about the plastic substitutions, input costs, labor, liabilities, and catalysts for revaluation today at 10:00am ET.
Packaging, like commercial services, can seem an attractive hiding place in an industrial slowdown. But we think it is in fact risky at these levels.
Shares of BLL could well underperform peers by 50% as capacity, Rexam accruals/charges, and unrealistic estimates finally impact investor expectations.