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Berry Global (BERY) Exhibits Solid Prospects Amid Risks

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Berry Global Group, Inc. (BERY - Free Report) is poised to benefit from strength in its consumer businesses across food and beverage end markets in the quarters ahead. Solid momentum in healthcare end market, recovery in construction end market along with its organic growth investments are likely to drive the company’s performance. Also, recovery in its industrial end market across the United States and Europe bodes well. For fiscal 2021 (ending September 2021), the company estimates organic sales growth of 5%.

Berry Global’s ability to generate strong cash flow enables it to improve organic growth capabilities, acquire assets and repay debts.  For fiscal 2021, it anticipates cash flow from operations of $1,575 million and free cash flow of $875 million. In the first nine months of fiscal 2021, the company repaid long-term debt of $3,287 million. Also, its acquired business of RPC Group (July 2019) has enhanced its growth opportunities in the plastic and recycled packaging industry.

Berry Global’s focus on improving operational productivity, along with partnerships across the value chain, is likely to improve margins and profitability in the quarters ahead. Investments in latest equipment technologies, advantaged film development and design for circularity are likely to increase its competency in the long run.

However, the company has been witnessing a rise in costs and expenses over some time. In fiscal 2020 (ended September 2020) and third-quarter fiscal 2021 (ended Jul 3, 2021), its cost of goods sold jumped 28.1% and 34.2%, respectively, year over year. Also, in fiscal 2020 and third-quarter fiscal 2021, selling, general and administrative expenses increased 45.8% and 4.5%, respectively. Of late, the company has been witnessing inflation in raw material and other costs such as corrugate and freight.

Zacks Investment Research
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In the past six months, this Zacks Rank #3 (Hold) stock has returned 12.9% compared with the industry’s growth of 10.1%.

Stocks to Consider

Some better-ranked stocks from the Zacks Industrial Products sector are Deere & Company (DE - Free Report) , Dover Corporation (DOV - Free Report) and Eaton Corporation, plc (ETN - Free Report) . All the companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Deere & Company delivered an earnings surprise of 67.90%, on average, in the trailing four quarters.

Dover delivered an earnings surprise of 17.59%, on average, in the trailing four quarters.

Eaton delivered an earnings surprise of 10.87%, on average, in the trailing four quarters.

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