Shares of Ball (BALL 1.96%) plunged 24% for August, according to data provided by S&P Global Market Intelligence, after the aluminum can maker's second-quarter report beat Wall Street sales estimates, but widely missed earnings expectations.
Consumer demand was much lower than expected as inflation continues to take a toll on sales. Coupled with Ball's exit from Russia following that country's invasion of Ukraine, the metal-container company was forced to slash its target for shareholder capital returns from an expected $1.75 billion to $1 billion.
While Ball's sales were higher from the year-ago period, it was largely due to passing along higher commodity costs to its customers rather than greater demand for its products. Volumes were actually flat year over year because consumers dramatically cut back on purchases due to the price shocks as manufacturers were forced to hike prices.
The downturn in demand is so severe, Ball is no longer expanding its manufacturing capacity in Las Vegas as it previously announced it would, and it is ending production at two factories in Phoenix and St. Paul, Minnesota.
In certain overseas markets, though, notably the U.K. and the Czech Republic, demand remains robust for the moment and its expansion plans remain on track.
Perhaps unknown to many is that beyond just making aluminum beverage cans and aerosol cans for personal products, Ball is also a major manufacturer of aluminum products for the aerospace industry. For example, Ball designed and built the advanced optical technology and lightweight mirror system in the James Webb Space Telescope that recently wowed the public with images of galaxies in deep space as well as more detail of near-space objects.
Sales and profits in that segment of Ball's business were higher year over year while its backlog hit $3 billion, and contracts won but not yet booked into backlog jumped to $4.7 billion.
Wall Street is concerned about Ball's near-term prospects as recession fears grow and inflation remains elevated. The can maker was hit with a number of downgrades by analysts because of slowing demand and the need to right-size the company, although the long-term viability of its business is still high.
Ball's stock is down 42% year to date while it's trading at 1.1 times its sales and 15 times next year's earnings. It could mean investors will see continued weakness in the stock as economic conditions continue to deteriorate.