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End Market Strength Aids Berry Global (BERY) Despite Cost Woes
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Berry Global Group, Inc. (BERY - Free Report) benefits from its presence in diverse end markets, which allows it to offset risks associated with a single market. In the quarters ahead, strength in its end markets like food, healthcare, pharmaceutical, personal care and beverage will continue to stoke growth. Also, its robust product portfolio, the bulk of which includes consumer non-discretionary products is likely to be beneficial in the near term. Management anticipates overall organic sales growth in low-single-digit from the year-ago fiscal quarter’s level for the fiscal fourth quarter (ending September 2022).
BERY follows a balanced capital-allocation strategy, enabling it to utilize its cash flow to improve organic growth capabilities, acquisitions and repay debts. Berry Global acquired RPC Group in July 2019, which enhanced its growth opportunities in the plastic and recycled packaging industry. Also, BERY repaid its long-term debt of $3,496 million and $16 million in fiscal 2021 (ended September 2021) and in the first nine months of fiscal 2022, respectively.
Berry Global’s measures to reward its shareholders through share buybacks are encouraging. In February 2022, BERY announced a share repurchase program worth $1 billion. It bought back $637 million worth of shares in the first nine months of fiscal 2022. While exiting the third quarter of fiscal 2022 (ended June 2022), BERY had shares worth $400 million left to repurchase from its previously-announced $1-billion share buyback plan.
However, Berry Global has been witnessing inflationary increases in costs and expenses over time. In third-quarter fiscal 2022, BERY’s cost of sales increased 1.8% on a year-over-year basis. Also, in the same period, the adjusted operating margin declined 30 basis points on a year-over-year basis to 9.3%. Escalation in raw material price, and other costs and challenges related to labor and supply-chain constraints are expected to persist in the quarters ahead, affecting BERY’s margins and profitability.
Foreign exchange is a major headwind to Berry Global, given its widespread presence in the international markets. In the fiscal third quarter, foreign exchange woes had an adverse impact of $151 million on its sales. Decline in the value of the local currencies of foreign markets relative to the U.S. dollar might affect BERY’s top line in the quarters ahead.
Image Source: Zacks Investment Research
In the past six months, this currently Zacks Rank #3 (Hold) stock has dropped 6.9% against the industry’s growth of 0.4%.
Zacks Rank & Stocks to Consider
Some better-ranked companies from the industrial products sector are discussed below:
AIT’s earnings estimates have increased 5.8% for fiscal 2023 (ending June 2023) in the past 60 days. Its shares have rallied 10.7% in the past six months.
Greif, Inc. (GEF - Free Report) presently has a Zacks Rank #2 (Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average.
GEF’s earnings estimates have increased 0.4% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 20.9% in the past six months.
Valmont Industries, Inc. (VMI - Free Report) presently has a Zacks Rank of 2. VMI’s earnings surprise in the last four quarters was 13.7%, on average.
In the past 60 days, Valmont’s earnings estimates have increased 3.8% for 2022. The stock has rallied 30.9% in the past six months.
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End Market Strength Aids Berry Global (BERY) Despite Cost Woes
Berry Global Group, Inc. (BERY - Free Report) benefits from its presence in diverse end markets, which allows it to offset risks associated with a single market. In the quarters ahead, strength in its end markets like food, healthcare, pharmaceutical, personal care and beverage will continue to stoke growth. Also, its robust product portfolio, the bulk of which includes consumer non-discretionary products is likely to be beneficial in the near term. Management anticipates overall organic sales growth in low-single-digit from the year-ago fiscal quarter’s level for the fiscal fourth quarter (ending September 2022).
BERY follows a balanced capital-allocation strategy, enabling it to utilize its cash flow to improve organic growth capabilities, acquisitions and repay debts. Berry Global acquired RPC Group in July 2019, which enhanced its growth opportunities in the plastic and recycled packaging industry. Also, BERY repaid its long-term debt of $3,496 million and $16 million in fiscal 2021 (ended September 2021) and in the first nine months of fiscal 2022, respectively.
Berry Global’s measures to reward its shareholders through share buybacks are encouraging. In February 2022, BERY announced a share repurchase program worth $1 billion. It bought back $637 million worth of shares in the first nine months of fiscal 2022. While exiting the third quarter of fiscal 2022 (ended June 2022), BERY had shares worth $400 million left to repurchase from its previously-announced $1-billion share buyback plan.
However, Berry Global has been witnessing inflationary increases in costs and expenses over time. In third-quarter fiscal 2022, BERY’s cost of sales increased 1.8% on a year-over-year basis. Also, in the same period, the adjusted operating margin declined 30 basis points on a year-over-year basis to 9.3%. Escalation in raw material price, and other costs and challenges related to labor and supply-chain constraints are expected to persist in the quarters ahead, affecting BERY’s margins and profitability.
Foreign exchange is a major headwind to Berry Global, given its widespread presence in the international markets. In the fiscal third quarter, foreign exchange woes had an adverse impact of $151 million on its sales. Decline in the value of the local currencies of foreign markets relative to the U.S. dollar might affect BERY’s top line in the quarters ahead.
Image Source: Zacks Investment Research
In the past six months, this currently Zacks Rank #3 (Hold) stock has dropped 6.9% against the industry’s growth of 0.4%.
Zacks Rank & Stocks to Consider
Some better-ranked companies from the industrial products sector are discussed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). AIT delivered a trailing four-quarter earnings surprise of 22.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
AIT’s earnings estimates have increased 5.8% for fiscal 2023 (ending June 2023) in the past 60 days. Its shares have rallied 10.7% in the past six months.
Greif, Inc. (GEF - Free Report) presently has a Zacks Rank #2 (Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average.
GEF’s earnings estimates have increased 0.4% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 20.9% in the past six months.
Valmont Industries, Inc. (VMI - Free Report) presently has a Zacks Rank of 2. VMI’s earnings surprise in the last four quarters was 13.7%, on average.
In the past 60 days, Valmont’s earnings estimates have increased 3.8% for 2022. The stock has rallied 30.9% in the past six months.