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Bemis (BMI) Misses Q2 Earnings & Sales, Trims '17 Outlook

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Bemis Company, Inc. (BMS - Free Report) reported second-quarter 2017 adjusted earnings per share of 48 cents, down 28% year over year. Earnings missed the Zacks Consensus Estimate of 56 cents. Results in the quarter were affected by challenging economic environment in Brazil due to political instability in the region.

Including one-time costs, earnings came in at 30 cents per share compared with 53 cents reported in the prior-year quarter.

Operational Update

Net sales decreased to $1,012 million from $1,021 million recorded in the year-ago quarter. Revenues also fell short of the Zacks Consensus Estimate of $1,036 million.

Bemis Company, Inc. Price, Consensus and EPS Surprise

 

Bemis Company, Inc. Price, Consensus and EPS Surprise | Bemis Company, Inc. Quote

Cost of products sold went up 2.7% year over year to $826 million in the quarter. Gross profit dipped 14% to $185.9 million from $217 million in the prior-year quarter. Gross margin contracted 290 basis points (bps) to 18.4% in the quarter.

Selling, general and administrative expenses decreased to $97.6 million from $100.4 million incurred in the year-ago quarter. Adjusted operating income plunged 26% year over year to $80.3 million. Adjusted operating margin contracted 270 bps to 7.9% in the quarter.

Segment Performance

Net sales at the U.S. Packaging segment edged down 1.4% year over year to $661.5 million. The decline in net sales was due to mix of products sold and contractual selling-price reductions previously negotiated with customers to retain and secure some high-technology packaging business for the long term, partially offset by higher unit volumes. Segment operating profit was down 22.6% to $80.1 million from $103.5 million in the prior-year quarter.

Net sales at the Global Packaging segment remained flat year over year at $350.6 million. Currency translation had a negative impact of 0.6%, while acquisitions contributed 1.66%. The organic sales decline of 0.9% reflects decreased unit volumes of approximately 3%, partially offset by sales price and mix. Segment operating profit slumped 37% to $17.7 million from $28.1 million recorded in the year-ago quarter.

Financial Update

At the end of the second quarter, Bemis generated cash and cash equivalents of $55 million, which decreased from $74.2 million at the end of 2016. Cash flow from operations came in at $200.5 million during the six-month period ended Jun 30, 2017, compared with $153 million in the comparable period last year.

At the end of the reported quarter, Bemis’ total debt increased to $1.54 billion compared with $1.53 billion at the end of 2016.

Restructuring & Cost Savings

During June, Bemis announced details on its restructuring and cost savings plan to improve profitability primarily in the U.S. and Latin American businesses by reducing manufacturing and administrative cost structure. These efforts are likely to generate total cost savings of $55–$60 million, with savings starting in 2017 and fully realized during 2019. It will help improve efficiency and margins, consequently paving the way for long-term growth. Estimated total costs to implement the plan are $100 to $120 million.

Per the plan, the company will close two manufacturing facilities and reduce approximately 300 administrative positions for a combined savings of approximately $30 million, when fully implemented.

Guidance

Bemis lowered its 2017 adjusted earnings per share guidance range to $2.35–$2.50 from the prior range of $2.50–$2.60 due to the impact of the sharp contraction and tough economic environment in Brazil.

The company also trimmed cash from operations guidance range to $400–$425 million from the prior range of $415–$455 million. Management expects capital expenditures for 2017 between $185 million and $200 million to support projects underway.

Share Price Performance

Bemis' shares have been underperforming its industry with respect to price performance. In the last one year, the stock has dropped 15.75%, while the industry recorded growth of 10.23%.



Zacks Rank & Key Picks

Currently, Bemis carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the sector include AGCO Corporation (AGCO - Free Report) , Deere & Company (DE - Free Report) and Apogee Enterprises, Inc. (APOG - Free Report) . You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO has expected long-term growth rate of 12.41%.

Deere has expected long-term growth rate of 9.17%.

Apogee has expected long-term growth rate of 12.50%.

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