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Should You Dump Bemis (BMS) Stock from Your Portfolio?
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In order to cushion portfolio, it is important for investors to exit underperforming stocks, which may dent their returns. Global manufacturer of flexible packaging products and pressure sensitive materials Bemis Company Inc. seems to be an underachiever of late and needs to be plucked out of investors’ stock garden immediately.
This Zacks Rank #4 (Sell) stock has declined 2.3% in the past one year, grossly underperforming the Zacks categorized Containers & Glass sub-industry’s gain of 14.2%.
We note that the industry occupies a space in the bottom 21% of the Zacks Classified industries (201 out of the 256). Let’s delve deeper to find out what’s weighing upon investor sentiment.
Riddled With Near-Term Headwinds
The operating environment remains challenged currently, highlighted by anemic end-market volumes particularly processed foods and higher plastic resin costs. Bemis continues to bear the brunt of a flat-to-declining U.S. packaged food market. In eight of the past nine years, volumes in the core flexible packaging business have been flat to down as the company continues to struggle within a complex supply chain. The top line has been on a downward spiral in the past few years as is evident from the chart below.
Further, inflation has been much higher in Argentina and Brazil where Bemis has operations. Market growth has been sluggish in Brazil which is likely to lead to pricing erosion amongst competitors. The sluggish Brazilian economy could also impact consumer adoption of the company’s sophisticated and higher priced packaging solutions. Further, higher interest expense remains a concern.
Estimates Moving South
The estimates for the company for the first quarter of 2017, fiscal 2017 and fiscal 2018, have moved south in the past 30 days, reflecting the negative outlook of analysts. For the first quarter, the estimate has gone down 1.5% to 66 cents per share. For fiscal 2017, the estimate has edged down 0.3% to $2.89 in the past 30 days. For fiscal 2018, the estimate has gone down 0.3% to $3.19 per share in the same time frame.
Negative Surprise History
The company has an average negative earnings surprise history of 0.05% in the trailing four quarters.
Expensive Valuation
Bemis' forward 12-month price earnings (P/E) ratio is 16.36 while the above-mentioned Zacks categorized sub industry’s average trailing 12-month P/E ratio is pegged lower at 16.29. This implies that the stock is overvalued and hence, we caution the investors against entering the stock at this point.
Likely Earnings Miss in the Next Quarter
Our proven model does not conclusively show that Bemis is likely to beat estimates in the first quarter of 2017. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP of Bemis is -3.03% as the Most Accurate estimate of 64 cents is pegged lower than the Zacks Consensus Estimate of 66 cents.
Bemis’ Zacks Rank #4 (Sell) when combined with ESP of -3.03% makes an earnings beat unlikely this quarter. As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Some better-ranked stocks in the sector include Casella Waste Systems, Inc. (CWST - Free Report) , Lawson Products, Inc. and Global Brass and Copper Holdings, Inc. .
Global Brass and Copper Holdings’ estimates for fiscal 2017 have gone up 3% in the past 30 days while Lawson Products’ estimates for fiscal 2017 have gone up 17%. Both carry a Zacks Rank #2.
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Should You Dump Bemis (BMS) Stock from Your Portfolio?
In order to cushion portfolio, it is important for investors to exit underperforming stocks, which may dent their returns. Global manufacturer of flexible packaging products and pressure sensitive materials Bemis Company Inc. seems to be an underachiever of late and needs to be plucked out of investors’ stock garden immediately.
This Zacks Rank #4 (Sell) stock has declined 2.3% in the past one year, grossly underperforming the Zacks categorized Containers & Glass sub-industry’s gain of 14.2%.
We note that the industry occupies a space in the bottom 21% of the Zacks Classified industries (201 out of the 256). Let’s delve deeper to find out what’s weighing upon investor sentiment.
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Riddled With Near-Term Headwinds
The operating environment remains challenged currently, highlighted by anemic end-market volumes particularly processed foods and higher plastic resin costs. Bemis continues to bear the brunt of a flat-to-declining U.S. packaged food market. In eight of the past nine years, volumes in the core flexible packaging business have been flat to down as the company continues to struggle within a complex supply chain. The top line has been on a downward spiral in the past few years as is evident from the chart below.
Further, inflation has been much higher in Argentina and Brazil where Bemis has operations. Market growth has been sluggish in Brazil which is likely to lead to pricing erosion amongst competitors. The sluggish Brazilian economy could also impact consumer adoption of the company’s sophisticated and higher priced packaging solutions. Further, higher interest expense remains a concern.
Estimates Moving South
The estimates for the company for the first quarter of 2017, fiscal 2017 and fiscal 2018, have moved south in the past 30 days, reflecting the negative outlook of analysts. For the first quarter, the estimate has gone down 1.5% to 66 cents per share. For fiscal 2017, the estimate has edged down 0.3% to $2.89 in the past 30 days. For fiscal 2018, the estimate has gone down 0.3% to $3.19 per share in the same time frame.
Negative Surprise History
The company has an average negative earnings surprise history of 0.05% in the trailing four quarters.
Expensive Valuation
Bemis' forward 12-month price earnings (P/E) ratio is 16.36 while the above-mentioned Zacks categorized sub industry’s average trailing 12-month P/E ratio is pegged lower at 16.29. This implies that the stock is overvalued and hence, we caution the investors against entering the stock at this point.
Likely Earnings Miss in the Next Quarter
Our proven model does not conclusively show that Bemis is likely to beat estimates in the first quarter of 2017. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP of Bemis is -3.03% as the Most Accurate estimate of 64 cents is pegged lower than the Zacks Consensus Estimate of 66 cents.
Bemis’ Zacks Rank #4 (Sell) when combined with ESP of -3.03% makes an earnings beat unlikely this quarter. As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Some better-ranked stocks in the sector include Casella Waste Systems, Inc. (CWST - Free Report) , Lawson Products, Inc. and Global Brass and Copper Holdings, Inc. .
Casella Waste’s estimate for fiscal 2017 has gone up 24% in the past 60 days. The stock flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Global Brass and Copper Holdings’ estimates for fiscal 2017 have gone up 3% in the past 30 days while Lawson Products’ estimates for fiscal 2017 have gone up 17%. Both carry a Zacks Rank #2.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>