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Here's Why You Must Hold on to Berry Global (BERY) Stock Now
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We have issued an updated research report on Berry Global Group, Inc. (BERY - Free Report) on Nov 19.
This company currently carries a Zacks Rank #3 (Hold). Its market capitalization is approximately $6.6 billion.
A few growth drivers and certain headwinds, which might influence Berry Global, have been discussed below.
Factors Favoring Berry Global
Financial Performance & Segmental Outlook: Berry Global pulled off a positive earnings surprise of 2.27% in the fourth quarter of fiscal 2018 (ended Sep 29, 2018). Further, the bottom line grew 3.4% year over year on the back of sales growth in the Health, Hygiene & Specialties, and Consumer Packaging segments. Synergistic gains from acquired is also a boon.
Berry Global believes that innovative packaging solutions and products will be advantageous for Consumer Packaging segment. In addition, the Health, Hygiene & Specialties segment will gain from investments that the company made in hygiene products (commercialization of these products is predicted in calendar 2019) in China. Moreover, the Engineered Materials segment will benefit from solid product offerings, advanced technology, growing importance of e-commerce business and the company’s efforts to expand business.
In the past three months, Berry Global’s shares have yielded 7.9% return against 5.1% decline recorded by the industry.
Sound Capital-Allocation Strategy: Berry Global uses its cash flow to boost its organic growth capabilities, repurchase shares, fund efforts to reduce costs, accomplish buyouts (detailed in the next point) and repay debts. In fiscal 2018 (ended Sep 29, 2018), the company repaid $335 million of long-term debt. Similar courses of actions are likely to be followed in fiscal 2019 (ending September 2019). In addition to this, Berry Global repurchased $33 million shares from its $500-million share buyback program approved in August 2018. We believe that improvement in cash flows in the quarters ahead will effectively support the company’s capital allocation strategies.
For fiscal 2019, Berry Global anticipates cash flow from operations to amount $1,036 million, higher than $1,004 million recorded in fiscal 2018. Adjusted free cash flow is predicted to be $670 million compared with $382 million recorded a year ago. Capital expenditure is likely to total $350 million.
Buyouts: Over time, Berry Global easily penetrated into unexplored markets, added products to portfolio and expanded geographical footprints with the help of acquired assets. In fiscal 2018, the company spent approximately $702 million on buyouts. Further, sales in the year grew 9% on account of synergistic gains from acquired assets.
During fiscal 2018, Berry Global added Clopay Plastic Products Company, Inc. and Laddawn, Inc. Since acquired in February 2018, Clopay Plastic Products has been strengthening s Health, Hygiene & Specialties segment. Costs synergies of $40 million (half to be realized in fiscal 2019) are anticipated from this acquisition. Laddawn was added to the company’s portfolio in August. It will integrate with Berry Global’s Engineered Materials segment. Annual cost synergies of $5 million are anticipated from this buyout.
Factors Working Against Berry Global
High Costs and Bottom-Line Projections: In the fourth quarter of fiscal 2018, Berry Global’s cost of goods sold grew 12.6% year over year. The increment was primarily induced by higher raw material costs. It accounted for fall in adjusted operating margin in the quarter. It’s worth mentioning here that results of Health, Hygiene and Specialties, and Consumer Packaging segments were adversely impacted by cost inflation in a major input — polypropylene resin.
Not just in this quarter, rising costs have been an issue for Berry Global for a long time. In the last five fiscal years (2014-2018), the company’s cost of goods sold increased roughly 9% (CAGR). We believe that further escalation in costs might prove detrimental to Berry Global’s margins in the quarters ahead.
In the past 7 days, earnings estimates on the stock for fiscal 2019 have been decreased by three brokerage firms. Estimates for fiscal 2020 (ending September 2020) have been lowered by one firm and increased by one. Currently, the Zacks Consensus Estimate for earnings is pegged at $3.75 for fiscal 2019 and $4.06 for fiscal 2020, reflecting declines of 1.1% and 1.9% from respective 7-day-ago tallies.
Risks From High Debts: High debts, if unchecked, can inflate Berry Global’s financial obligations and hurt its profitability. For fiscal 2018, the company’s long-term debt was $5,844 million, up 3.6% year over year.
For fiscal 2019, Berry Global predicts interest expenses of approximately $270 million, higher than $259 million recorded in fiscal 2018.
Overseas Operations: Geographical diversification exposed Berry Global to headwinds arising from geopolitical issues and unfavorable movements in foreign currencies. Sales growth in the fourth quarter of fiscal 2018 was adversely impacted by 1% due to forex woes.
In the past 60 days, earnings estimates for all these three stocks improved for the current year. Further, positive earnings surprise for the last quarter was 17.95% for DXP Enterprises, 23.64% for EnPro Industries and 60.61% for Luxfer.
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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Here's Why You Must Hold on to Berry Global (BERY) Stock Now
We have issued an updated research report on Berry Global Group, Inc. (BERY - Free Report) on Nov 19.
This company currently carries a Zacks Rank #3 (Hold). Its market capitalization is approximately $6.6 billion.
A few growth drivers and certain headwinds, which might influence Berry Global, have been discussed below.
Factors Favoring Berry Global
Financial Performance & Segmental Outlook: Berry Global pulled off a positive earnings surprise of 2.27% in the fourth quarter of fiscal 2018 (ended Sep 29, 2018). Further, the bottom line grew 3.4% year over year on the back of sales growth in the Health, Hygiene & Specialties, and Consumer Packaging segments. Synergistic gains from acquired is also a boon.
Berry Global believes that innovative packaging solutions and products will be advantageous for Consumer Packaging segment. In addition, the Health, Hygiene & Specialties segment will gain from investments that the company made in hygiene products (commercialization of these products is predicted in calendar 2019) in China. Moreover, the Engineered Materials segment will benefit from solid product offerings, advanced technology, growing importance of e-commerce business and the company’s efforts to expand business.
In the past three months, Berry Global’s shares have yielded 7.9% return against 5.1% decline recorded by the industry.
Sound Capital-Allocation Strategy: Berry Global uses its cash flow to boost its organic growth capabilities, repurchase shares, fund efforts to reduce costs, accomplish buyouts (detailed in the next point) and repay debts. In fiscal 2018 (ended Sep 29, 2018), the company repaid $335 million of long-term debt. Similar courses of actions are likely to be followed in fiscal 2019 (ending September 2019). In addition to this, Berry Global repurchased $33 million shares from its $500-million share buyback program approved in August 2018. We believe that improvement in cash flows in the quarters ahead will effectively support the company’s capital allocation strategies.
For fiscal 2019, Berry Global anticipates cash flow from operations to amount $1,036 million, higher than $1,004 million recorded in fiscal 2018. Adjusted free cash flow is predicted to be $670 million compared with $382 million recorded a year ago. Capital expenditure is likely to total $350 million.
Buyouts: Over time, Berry Global easily penetrated into unexplored markets, added products to portfolio and expanded geographical footprints with the help of acquired assets. In fiscal 2018, the company spent approximately $702 million on buyouts. Further, sales in the year grew 9% on account of synergistic gains from acquired assets.
During fiscal 2018, Berry Global added Clopay Plastic Products Company, Inc. and Laddawn, Inc. Since acquired in February 2018, Clopay Plastic Products has been strengthening s Health, Hygiene & Specialties segment. Costs synergies of $40 million (half to be realized in fiscal 2019) are anticipated from this acquisition. Laddawn was added to the company’s portfolio in August. It will integrate with Berry Global’s Engineered Materials segment. Annual cost synergies of $5 million are anticipated from this buyout.
Factors Working Against Berry Global
High Costs and Bottom-Line Projections: In the fourth quarter of fiscal 2018, Berry Global’s cost of goods sold grew 12.6% year over year. The increment was primarily induced by higher raw material costs. It accounted for fall in adjusted operating margin in the quarter. It’s worth mentioning here that results of Health, Hygiene and Specialties, and Consumer Packaging segments were adversely impacted by cost inflation in a major input — polypropylene resin.
Not just in this quarter, rising costs have been an issue for Berry Global for a long time. In the last five fiscal years (2014-2018), the company’s cost of goods sold increased roughly 9% (CAGR). We believe that further escalation in costs might prove detrimental to Berry Global’s margins in the quarters ahead.
In the past 7 days, earnings estimates on the stock for fiscal 2019 have been decreased by three brokerage firms. Estimates for fiscal 2020 (ending September 2020) have been lowered by one firm and increased by one. Currently, the Zacks Consensus Estimate for earnings is pegged at $3.75 for fiscal 2019 and $4.06 for fiscal 2020, reflecting declines of 1.1% and 1.9% from respective 7-day-ago tallies.
Berry Global Group, Inc. Price and Consensus
Berry Global Group, Inc. Price and Consensus | Berry Global Group, Inc. Quote
Risks From High Debts: High debts, if unchecked, can inflate Berry Global’s financial obligations and hurt its profitability. For fiscal 2018, the company’s long-term debt was $5,844 million, up 3.6% year over year.
For fiscal 2019, Berry Global predicts interest expenses of approximately $270 million, higher than $259 million recorded in fiscal 2018.
Overseas Operations: Geographical diversification exposed Berry Global to headwinds arising from geopolitical issues and unfavorable movements in foreign currencies. Sales growth in the fourth quarter of fiscal 2018 was adversely impacted by 1% due to forex woes.
Stocks to Consider
Some better-ranked stocks in the Zacks Industrial Products sector are DXP Enterprises, Inc. (DXPE - Free Report) , EnPro Industries, Inc. (NPO - Free Report) and Luxfer Holdings PLC (LXFR - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for all these three stocks improved for the current year. Further, positive earnings surprise for the last quarter was 17.95% for DXP Enterprises, 23.64% for EnPro Industries and 60.61% for Luxfer.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>