Berry Global Group, Inc. ( BERY Quick Quote BERY - Free Report) reported better-than-expected second-quarter fiscal 2021 (ended Apr 3, 2021) results. Its earnings surpassed estimates by 21.37% — this being the seventh consecutive quarter of earnings beat. Also, the quarter’s sales topped estimates by 6.47%. The company’s adjusted earnings of $1.59 per share surpassed the Zacks Consensus Estimate of $1.31. Also, the bottom line increased 34% the year-ago number of $1.19. Notably, the company’s shares rose 3.6% in the past couple of days to eventually close the trading session at $66.26 on Wednesday. Revenue Details
In the quarter under review, Berry Global’s net sales were $3,370 million, reflecting year-over-year increase of 13.3%. The improvement was driven by 5% growth in organic volumes, positive impact of $92 million from favorable movements in foreign currencies, higher selling prices of $192 million owing to the pass through of higher resin costs, partially offset by $53 million of divesture sales.
Further, the top line surpassed the consensus estimate of $3,165 million. The company reports results under four segments — Consumer Packaging–International, Consumer Packaging–North America, Health, Hygiene & Specialties, and Engineered Materials. A brief snapshot of fiscal second-quarter segmental sales is provided below: Consumer Packaging–International’s sales were $1,060 million compared with $970 million in the year-ago quarter. The increase was attributable to 4% growth in organic volumes and positive impact of $71 million from favorable movements in foreign currencies. It accounted for 31.3% of the quarter’s net sales. Consumer Packaging–North America’s sales were $731 million, up 15.5% year over year. The increase was attributable to 5% rise in organic volumes and positive impact of $60 million from favorable movements in foreign currencies. It accounted for 21.7% of the quarter’s net sales. Revenues generated from Health, Hygiene & Specialties amounted to $781 million, up 21.3% year over year. The improvement was driven by 8% increase in organic volumes and positive impact of $83 million from higher selling prices. It accounted for 23.1% of the quarter’s net sales. Revenues from Engineered Materials increased 9.6% year over year to $798 million. The rise was driven by 3% increase in organic volumes, positive impact of $15 million from favorable movements in foreign currencies and positive impact of $69 million from higher selling prices, partially offset by $43 million of divesture sales. It accounted for 23.9% of the quarter’s net sales. Margin Profile
In the fiscal second quarter, Berry Global’s cost of goods sold increased 13.1% to $2,706 million. It represented 80.3% of net sales compared with 80.4% in the year-ago quarter. Selling, general and administrative expenses rose 7.8% to $220 million and represented 6.5% of net sales.
Adjusted operating income in the quarter increased 15.7% to $384 million. Also, adjusted operating margin came in at 11.4%, up 20 basis points year over year. Net interest expenses were $84 million, down 24.3%. Balance Sheet & Cash Flow
Exiting fiscal second quarter, Berry Global’s cash and cash equivalents were $843 million, down 0.5% from $847 million in the previous quarter. Current and long-term debt decreased 2% to $9,882 million sequentially.
In the first six months of fiscal 2021, the company repaid $2,683 million of borrowings. Its proceeds from borrowings totaled $2,316 million. In the first half of fiscal 2021, it generated net cash of $638 million from operating activities, up 19.7% from the year-ago period. Outlook
For fiscal 2021 (ending September 2021), Berry Global anticipates witnessing organic sales growth of 5% on a year-over-year basis. Also, the company raised operating EBITDA guidance at mid-point from the previous projection by $50 million to $2.25 billion
For fiscal 2021, Berry Global predicts a free cash flow in the range of $875-$975 million, with cash flow from operations of $1,575-$1,675 million and capital expenditure of $700 million. Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks are Alcoa Corporation ( AA Quick Quote AA - Free Report) , Applied Industrial Technologies, Inc. ( AIT Quick Quote AIT - Free Report) and Lakeland Industries, Inc. ( LAKE Quick Quote LAKE - Free Report) . While Alcoa and Applied Industrial currently sport a Zacks Rank #1 (Strong Buy), Lakeland Industries carries a Zacks Rank #2 (Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here Alcoa delivered an earnings surprise of 56.78%, on average, in the trailing four quarters. Applied Industrial delivered an earnings surprise of 30.33%, on average, in the trailing four quarters. Lakeland Industries delivered an earnings surprise of 230.73%, on average, in the trailing four quarters. Zacks Top 10 Stocks for 2021
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