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Berry Global's Laddawn Buyout to Boost Core Films Business

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Berry Global Group, Inc. (BERY - Free Report) has announced yesterday that it has acquired Massachusetts-based Laddawn, Inc. The financial aspect of the transaction has not been disclosed.

Laddawn, Inc., founded in 1976, primarily engages in the manufacturing of plastic film and bags, meant for packaging applications. Products offered by the firm include reclosable bags, film and sheeting, mailers and accessories, poly bags, tubing and sleeves, and customized products. The firm’s sales amounted to $145 million for the 12 months ended Jul 31, 2018.

Details of Buyout

Per the agreement, Berry Global will integrate Laddawn with its Engineered Materials segment. It’s worth noting here that the segment primarily offers adhesives and tapes, polyethylene based can liners, film products, printed films, and laminated and specialty coated products. In third-quarter fiscal 2018 (ended Jun 30, 2018), the segment accounted for 33.2% of the company’s net sales.

This buyout will be beneficial for Berry Global, as it will enhance the company’s sales generating capabilities in the core films market, and add 380 skilled employees and five manufacturing facilities in the United States. Further, Laddawn’s online and mobile selling expertise will help the company to cater to the demands of a large number of customers, especially small and mid-sized.

Strengthening Portfolio Through Buyouts

Acquisition is one of the favored growth options for Berry Global. In the third quarter of fiscal 2018, acquired assets added roughly 6.6% to the quarter’s sales growth. Particularly, the company’s Health, Hygiene & Specialties segment sales in the reported quarter were driven by the Clopay Plastic Products buyout (completed in February 2018).

Prior to the Clopay Plastic Products buyout, the company acquired Adchem Corp. in July 2017. Since acquired, Adchem has aided in aiding results of the company’s Engineered Materials segment.

Zacks Rank & Key Picks

With a market capitalization of nearly $6 billion, Berry Global currently carries a Zacks Rank #4 (Sell). Its financial performance in third-quarter fiscal 2018 was lackluster, with earnings lagging estimates by 9.4%. For fiscal 2018 (ending September 2018), the company predicts cash flow from operations of roughly $987 million, below its previous projection of more than $1 billion. Moreover, escalating debt levels, as well as headwinds emanating from rise in transportation expenses and inflation in raw material costs, remain major concerns for the company.

In the past 30 days, the company’s earnings estimates for fiscal 2018 have been revised down by 7 brokerage firms while that for fiscal 2019 (ending September 2019) have been lowered by six firms. Currently, the Zacks Consensus Estimate for earnings per share is pegged at $3.36 for fiscal 2018 and $3.81 for fiscal 2019, reflecting a decline of 7.2% and 4.5% from the respective 30-day-ago tallies.

Berry Global Group, Inc. Price and Consensus
 

Berry Global Group, Inc. Price and Consensus | Berry Global Group, Inc. Quote

Further, the company’s share price has decreased 3.1% in the past month. This share price performance is worse than 0.2% gain recorded by the industry it belongs to.



We believe that Berry Global’s acquisitive nature might help in boosting its growth opportunities.

Some better-ranked stocks in the Zacks Industrial Products sector are Altra Industrial Motion Corp. (AIMC - Free Report) , Chart Industries, Inc. (GTLS - Free Report) and Barnes Group Inc. (B - Free Report) . While Altra Industrial Motion sports a Zacks Rank #1 (Strong Buy), both Chart Industries and Barnes Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for each of these stocks improved for the current year and the next year. The average positive earnings surprise for the last four quarters was 4.01% for Altra Industrial Motion, 29.36% for Chart Industries and 6.88% for Barnes Group.

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