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Berry Global to Gain From Restructuring & Buyouts Amid Risks

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On Nov 27, we issued an updated research report on Berry Global Group, Inc. (BERY - Free Report) .

Over the past three months, this Zacks Rank #3 (Hold) stock has returned 19.1% compared with the industry’s growth of 6.8%.



Existing Scenario

In July 2019, Berry Global raised the number of its business segments from three to four — Health, Hygiene and Specialties; Consumer Packaging - International; Engineered Materials; and Consumer Packaging - North America. The move, announced following the completion of the RPC Global buyout (July 2019), will enable Berry Global to offer better services to customers and enhance shareholders' value.

Also, the company has been steadily strengthening business through acquisitions. In this regard, its buyout of RPC Global has been strengthening its growth opportunities by creating a leader in the plastic and recycled packaging industry. Also, this deal will generate annual cost synergies of $150 million, with half of it expected to be realized in fiscal 2020 (ending September 2020).  Moreover, the company’s acquisition of Laddawn in August 2018 has been strengthening its Engineered Materials segment through the enhancement of sales generating capabilities in the core films market.

However, rising cost of goods sold has been a major concern for Berry Global over the past several quarters. The metric surged 47.3% in the fourth quarter of fiscal 2019 (ended Sep 28, 2019), on a year-over-year basis, despite cost-reduction initiatives. In addition, the company's selling, general and administrative expenses jumped 74.6% in the quarter.

Moreover, analysts have increasingly grown bearish on the company over the past seven days. Consequently, the Zacks Consensus Estimate for earnings has moved 12.9% south to 61 cents for first-quarter fiscal 2020 (ending December 2019).

Key Picks

Some better-ranked stocks in the Zacks Industrial Products sector are Kaman Corporation (KAMN - Free Report) , Brady Corporation (BRC - Free Report) and Energous Corporation (WATT - Free Report) . While Kaman sports a Zacks Rank #1 (Strong Buy), Brady and Energous carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kaman delivered average positive earnings surprise of 7.72% in the trailing four quarters.

Brady delivered average positive earnings surprise of 9.67% in the trailing four quarters.

Energous pulled off average positive earnings surprise of 6.67% in the trailing four quarters.

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