Ball (BALL)

Packaging manufacturer Ball (NYSE:BLL) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 9.6% year on year to $3.38 billion. Its GAAP profit of $1.18 per share was 29.2% above analysts’ consensus estimates.

Company Overview

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 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.

Competitors in the packaging industry include Crown Holdings (NYSE:CCK), Ardagh Group (NYSE:ARD), and Silgan Holdings (NASDAQ:SLGN) while competitors in the aerospace industry consist of Lockheed Martin (NYSE:LMT), Boeing (NYSE:BA), Northrop Grumman (NYSE:NOC), and Raytheon (NYSE:RTX).

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Ball’s 2.2% annualized revenue growth over the last five years was sluggish. This fell short of our benchmarks and is a poor baseline 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 performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 5.4% annually.

This quarter, Ball reported year-on-year revenue growth of 9.6%, and its $3.38 billion of revenue exceeded Wall Street’s estimates by 1.3%.

Looking ahead, sell-side analysts expect revenue to grow 4.1% over the next 12 months. Although this projection implies its newer products and services will spur better top-line performance, it is still below the sector average.

Ball has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 21.5% gross margin over the last five years. That means Ball paid its suppliers a lot of money ($78.48 for every $100 in revenue) to run its business.

In Q3, Ball produced a 20.1% gross profit margin, down 1.3 percentage points year on year. Ball’s full-year margin has also been trending down over the past 12 months, decreasing by 4.1 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Ball has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 9.2%, higher than the broader industrials sector.

Analyzing the trend in its profitability, Ball’s operating margin rose by 2.7 percentage points over the last five years, as its sales growth gave it operating leverage. Its expansion was impressive, especially when considering most Industrial Packaging peers saw their margins plummet.

In Q3, Ball generated an operating margin profit margin of 23.9%, up 14.8 percentage points year on year. The increase was solid, and because its gross margin actually decreased, we can assume it was more efficient because its operating expenses like marketing, R&D, and administrative overhead grew slower than its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Ball’s EPS grew at a decent 9.6% compounded annual growth rate over the last five years, higher than its 2.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis 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 2.7 percentage points over the last five years. On top of that, its share count shrank by 18%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Ball, its two-year annual EPS growth of 13.3% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q3, Ball reported EPS of $1.18, up from $0.65 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Ball’s full-year EPS of $2.46 to grow 39.7%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Ball broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.

Taking a step back, we can see that Ball’s margin dropped by 1.4 percentage points during that time. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the longer-term trend returns, it could signal it’s becoming a more capital-intensive business.

Ball’s free cash flow clocked in at $257 million in Q3, equivalent to a 7.6% margin. The company’s cash profitability regressed as it was 8.4 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Ball historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.7%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Ball’s ROIC has stayed the same over the last few years. If the company wants to become an investable business, it must improve its returns by generating more profitable growth.

Ball reported $568 million of cash and $7.21 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.1 billion of EBITDA over the last 12 months, we view Ball’s 3.2× net-debt-to-EBITDA ratio as safe. We also see its $117 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Ball beat analysts’ revenue and EPS expectations this quarter. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $47.05 immediately following the results.

Updated: December 3, 2025 at 10:16 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Ball.

We see the value of companies helping their customers, but in the case of Ball, we’re out. For starters, its revenue growth was weak over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its low free cash flow margins give it little breathing room. On top of that, its organic revenue growth has disappointed.

Ball’s P/E ratio based on the next 12 months is 12.5x. This valuation multiple is fair, but we don’t have much confidence in the company. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $60.15 on the company (compared to the current share price of $48.77).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.