Recyclable Packaging And New Capacity Will Unlock Future Demand

Key Takeaways

• Expanding demand for sustainable aluminum packaging and ready-to-drink beverages is fueling robust growth and enhanced market positioning across key geographies.
  
• Operational focus on core packaging, supply discipline, and strong customer contracts is boosting efficiency, revenue stability, and long-term earnings visibility.
  
• Heavy dependence on key customers, rising input costs, shifting product mix, operational challenges, and sustainability pressures threaten margins, revenue stability, and long-term market share.

Catalysts

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

• Accelerating demand for recyclable aluminum packaging, especially in Europe and emerging markets, is driving robust volume growth above historical averages as sustainability and anti-plastic trends gain traction globally; this is expected to sustain revenue growth and potentially improve operating leverage.
  
• The shift in consumer behavior toward ready-to-drink beverages and energy drinks is supporting ongoing volume expansion, particularly across North America and EMEA, positioning Ball to grow at or ahead of market rates, favorably impacting top-line revenue and capacity utilization rates.
  
• Tight industry supply and new capacity investments (e.g., new Northwest facility, asset acquisition in Florida) are aligning Ball to capture incremental share in high-growth regions while enhancing geographic footprint, underpinning long-term revenue growth and improved fixed-cost absorption.
  
• Post-divestiture focus on core aluminum packaging and disciplined cost control initiatives are driving operational efficiency and capital allocation improvements, supporting higher net margins and accelerating comparable diluted EPS growth targets (12%-15%) in the near-to-medium term.
  
• Increasing contract coverage (over 90% of 2026 volumes under contract in North America) paired with long-standing customer relationships provides revenue and earnings visibility, mitigating downside risks and enabling further stability in free cash flow and earnings trajectory.

Ball Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Ball's revenue will grow by 4.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.7% today to 7.7% in 3 years time.
• Analysts expect earnings to reach $1.1 billion (and earnings per share of $4.29) by about September 2028, up from $581.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.9x on those 2028 earnings, down from 23.6x today. This future PE is lower than the current PE for the US Packaging industry at 22.2x.
• 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 7.36%, as per the Simply Wall St company report.

Ball Future Earnings Per Share Growth

Risks

• Customer concentration risk remains significant, particularly in South America where Ball's performance is heavily dependent on a single large partner; if this customer underperforms or renegotiates contract terms, Ball could face margin and revenue pressure over the long term.
  
• Persistent input cost volatility-including exposure to tariffs and aluminum prices-creates margin headwinds; if not effectively managed or hedged, these pressures could lead to sustained earnings volatility and decreased net margins.
  
• The shift in product mix away from higher-margin beer cans toward lower-margin nonalcoholic and energy drink categories, while driving volume, may lead to ongoing margin compression and less profitability on incremental revenue.
  
• Ongoing labor and operational inefficiencies in North America linked to capacity constraints, demand surges, and logistical challenges may elevate costs over time, potentially limiting Ball's ability to scale operating leverage and improve EBITDA margins.
  
• Intensifying legislative and competitive pressures-including sustainability regulations, potential zero-waste mandates, and increased adoption of alternative packaging materials by major consumer brands-could structurally reduce long-term demand for traditional aluminum cans, limiting revenue growth and threatening market share.

Valuation

• The analysts have a consensus price target of $64.769 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 $84.0, and the most bearish reporting a price target of just $54.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $14.2 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 15.9x, assuming you use a discount rate of 7.4%.
• Given the current share price of $50.41, the analyst price target of $64.77 is 22.2% 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.