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%.
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%.
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
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.
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