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Here's Why You Should Steer Clear of Berry Global (BERY) Now

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Berry Global Group, Inc. (BERY - Free Report) is grappling with persistent supply-chain issues, softness in end markets, high debt levels and foreign-currency headwinds.

Let’s discuss the factors that are likely to impact this Zacks Rank #4 (Sell) company’s potential.

Business Weakness: Berry Global is experiencing weakness in its Engineered Materials segment due to lower selling prices from the pass-through of lower resin costs in the U.S. and volume softness primarily in European industrial markets along with customer destocking. Also, decreasing demand due to price inflation on consumer purchases and destocking in small pockets of continued supply-chain issues s a major challenge for the company.

High Debt Level: High debt is a major roadblock for the company. BERY’s long-term debt in the last five fiscal years (2018-2022) witnessed a 9.7% CAGR. Despite the company’s efforts to reduce debt leverage, its current and long-term debt remained high at $9,295 million at the end of the second quarter of fiscal 2023 (ended March 2023).

Forex Woes: Given its widespread presence in international markets, Berry Global is exposed to unfavorable foreign currency movement. The increased value of the U.S. dollar relative to the local currencies of the foreign markets is affecting the company’s top line. In the second quarter of fiscal 2023, foreign exchange headwinds had an adverse impact of $80 million on BERY’s sales.

Southbound Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for fiscal 2023 earnings has been revised downward by a penny.

Stocks to Consider

Some better-ranked companies from the Industrial Products sector are discussed below:

Greif, Inc. (GEF - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.

GEF delivered a trailing four-quarter earnings surprise of 7.7%, on average. GEF’s earnings estimates have increased 12.6% for fiscal 2023 (ending October 2023) in the past 60 days. Its shares have risen 4.4% in the year-to-date period.

Allegion plc (ALLE - Free Report) presently carries a Zacks Rank #2 (Buy). ALLE’s earnings surprise in the last four quarters was 12.5%, on average.

In the past 60 days, Allegion’s earnings estimates have been unchanged for 2023. The stock has gained 12.6% in the year-to-date period.

A. O. Smith Corporation (AOS - Free Report) presently carries a Zacks Rank of 2. AOS’ earnings surprise in the last four quarters was 8%, on average.

In the past 60 days, estimates for A. O. Smith’s 2023 earnings have increased 0.6%. The stock has gained 26.1% in the year-to-date period.

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