It has been more than a month since the last earnings report for Bemis Company, Inc. (BMS - Free Report) . Shares have added about 9.4% in that time frame.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Bemis Misses Q2 Earnings & Sales, Trims '17 Outlook
Bemis reported second-quarter 2017 adjusted earnings per share of $0.48, down 28% year over year. Earnings missed the Zacks Consensus Estimate of $0.56. 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 $0.30 per share compared with $0.53 reported in the prior-year quarter.
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.
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.
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.
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.
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 previous range of $415–$455 million. Management expects capital expenditures for 2017 between $185 million and $200 million to support projects underway.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the past month as none of them issued any earnings estimate revisions.
At this time, the stock has an average Growth Score of C, while its Momentum is doing a bit better with a B. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than those looking for growth and value.
The stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.