Back to top

Here's Why Investors Should Retain Bemis (BMS) Stock Now

Read MoreHide Full Article
Bemis Company, Inc. (BMS - Free Report) remains well poised for growth backed by its initiatives to improve cost structure through the Agility plan and investment in growth projects despite near-term headwinds like raw material inflation and unfavorable currency translation.
 
The manufacturer of flexible packaging products and pressure-sensitive materials, with a market capitalization of approximately $4.6 billion, currently carries a Zacks Rank #3 (Hold).
 
Factors Favoring Bemis
 
Value Growth Momentum (VGM) Score
 
Bemis currently has a Zacks VGM score of A. Here V stands for Value, G for Growth and M for Momentum. Such a score allows you to eliminate the negative aspects of stocks and select winners. The VGM Score of A, along with some other key metrics, makes the company a solid choice for investors.
 
Positive Earnings Surprise History
 
Bemis has an impressive surprise history, surpassing the Zacks Consensus Estimate in the last four quarters. The company has an average beat of 6.84%.
 
Return on Assets (ROA)
 
Bemis currently has a ROA of 6.4%, while the industry's ROA is 5.7%. An above-average ROA denotes that the company is generating earnings by effectively managing assets.
 
Upbeat Guidance for 2018
 
Bemis’ earnings per share outlook is pegged at $2.75-$2.85 for full-year 2018. The mid-point of earnings guidance range reflects a year-over-year rise of 17%. The Zacks Consensus Estimate for the fiscal is pegged at $2.80, reflecting year-over-year growth of 17%. 
 
What’s Deterring Bemis? 
 
Bemis will experience material price inflation of 2-3% globally as well as the impact of exceeding annual pay for performance targets in 2018. This will impact its margin performance. The political instability and challenging economic environment in Brazil will impact volumes in the region. Further, unfavorable currency translation due to the devaluation of Brazilian Real and Argentine Peso will impact near-term results.
 
Why Should You Still Hold?
 
The company’s initiatives to improve cost structure through the Agility plan will help mitigate the impact from raw material inflation. To fix, strengthen, and grow its business, Bemis launched the Agility plan in 2017. The plan includes optimizing manufacturing capacity, consolidating office space, and reducing SG&A as well as other costs. It also involves the simplification of product portfolio and organizational structure, rebalancing R&D efforts along with pursuing targeted areas of growth in the North American business. Bemis expects to realize roughly $35 million of savings from the plan.
 
Bemis expects capital expenditures for fiscal 2018 to be between $156 million and $160 million. Of this, about $55 million is for environmental matters, health and safety at plants and around $100 million is targeted for select growth projects and asset-recapitalization projects.
 
Amcor and Bemis have announced that they will combine in $6.8 billion all-stock transaction. The combination will create a global leader in consumer packaging. The combined entity will have a worldwide presence with a broader product portfolio, increased product differentiation as well as enhanced operating capabilities. It will also leverage Bemis’ extensive U.S. manufacturing base and strengths in material science and innovation.
 
The transaction will be effected at a fixed exchange ratio of 5.1 Amcor shares for each Bemis share, resulting in Amcor and Bemis shareholders owning approximately 71% and 29% of the combined company, respectively. The combined company will have total revenues of $13 billion, EBITDA of $2.2 billion, annual cash flow after capital expenditure of more than $1 billion.
 
The company has a long-term estimated earnings growth of 7%.
 
Price Performance
 
 
The company has outperformed the industry it belongs to in the past year. The stock has gained around 16%, while the industry recorded growth of 4%.
 
Bottom Line
 
Investors might want to hold on to the stock, at present, as it has ample prospects of outperforming peers in the near future.
 
Stocks to Consider
 
Some better-ranked stocks in the same sector include W.W. Grainger, Inc. (GWW - Free Report) , iRobot Corporation (IRBT - Free Report) and Atkore International Group Inc. (ATKR - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Grainger has a long-term earnings growth rate of 12.5%. Its shares have appreciated 118% over the past year.
 
iRobot has a long-term earnings growth rate of 19.5%. The company’s shares have gained 22% in a year’s time.
 
Atkore International has a long-term earnings growth rate of 10%. The stock has rallied 65% in a year’s time.
.
5 Companies Verge on Apple-Like Run
 
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2018 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs. A bonus Zacks Special Report names this breakthrough and the 5 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains.
 


More from Zacks Analyst Blog

You May Like