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Why Ball Stock Popped on Friday

Motley Fool - Fri Sep 29, 2023

What happened

In a fine end to its trading week, Ball Corporation(NYSE: BALL) stock flew higher on Friday after an analyst upgraded his recommendation. The food packaging -- canning, to put it another way -- specialist's share price defied gravity by more than 3%, on a day when the bellwether S&P 500 index stumbled to a 0.3% decline.

So what

The party doing the upgrading was Jefferies. Well before market open, prognosticator Philip Ng changed his recommendation on Ball stock to buy from hold. In doing so, he added $1 per share to his price target for a new level of $64. That implies significant upside of almost 30% to the current share price.

In his research note heralding the upgrade, Ng wrote, "With the multiple rebasing back to pre-2019 levels, [free cash flow] reaccelerating, and fundamentals at a trough, we find the risk:reward attractive."

The analyst also waxed bullish about Ball's sale of its Ball Aerospace unit, which the company agreed last month to sell to defense sector mainstay BAE Systems for $5.6 billion. Those proceeds should help the company fund stock buybacks next year, Ng believes. This follows Ball's pronouncement that it would return capital via both buybacks and dividends.

Now what

Investors are also likely cheered by the fact that Ball is slimming down with the sale of the aerospace operation. It wasn't necessarily a good fit with its canning activities, and the divestment will help the company focus more on its core competency.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group. The Motley Fool recommends BAE Systems. The Motley Fool has a disclosure policy.

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