On Jan 9, we issued an updated research report on Bemis Company, Inc. BMS. The company is poised to gain from the U.S. tax reform as well as the initiatives to improve cost structure through the Agility plan. Its focus on capital expenditures is also anticipated to drive growth.
Let’s illustrate these growth factors in detail.
U.S. Tax Reform to Aid Bemis’ Earnings
During fourth-quarter fiscal 2017, Bemis recorded a non-cash tax benefit of $67.2 million as a result of the tax reform passed in December 2017. The company projects adjusted earnings per share in fiscal 2018 to be in the range of $2.75-$2.90. This range includes an expected 31 cents benefit related to the tax reform.The mid-point of the earnings per share guidance range reflects an 18% increase over last year.
Agility Plan to Drive Growth
To fix, strengthen, and grow its business, Bemis launched an improvement plan called “Agility” in fiscal 2017. As part of this three-pronged approach, the “fix” aspect involves its previous restructuring and cost-savings plan announced in June and September. Of the targeted pretax annual savings of $65 million, $4.1 million was realized in fiscal 2017.
In fiscal 2018, Bemis anticipates to realize about $35 million of the benefits, with the balance in fiscal 2019. The plan includes optimizing manufacturing capacity, consolidating office space, and reducing SG&A cost structure and other costs. The plan also focuses on simplification of the company’s product portfolio and organizational structure, rebalancing R&D efforts to focus on manufacturing improvements, and deliberately pursuing targeted areas of growth in the North American business. These actions will prove conducive to growth over the long term.
Focus on Capital Expenditure to Boost Results
Bemis expects capital expenditures for fiscal 2018 to be between $156 million and $160 million. Of this, about $55 million is for the environmental, health and safety programs at plants, and approximately $100 million is targeted for select growth projects and asset recapitalization projects.
Share Price Performance
Bemis has outperformed its industry with respect to price performance over the past six months. The stock has gained around 3.8%, while the industry has recorded growth of merely 0.2% during the same time frame.
Zacks Rank & Other Stocks to Consider
Bemis currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the same sector are Graphic Packaging Holding Company GPK, Packaging Corporation of America PKG and Caterpillar Inc. CAT. All three stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Graphic Packaging has a long-term earnings growth rate of 5%. Its shares have rallied 7.4%, over the past six months.
Packaging Corporation of America has a long-term earnings growth rate of 8.3%. The company’s shares have been up 4.2% during the same time frame.
Caterpillar has a long-term earnings growth rate of 10.3%. The stock has gained 31.2% in six months’ time.
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Bemis Company, Inc. (BMS) : Free Stock Analysis Report
Packaging Corporation of America (PKG) : Free Stock Analysis Report
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