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Bemis Upgraded to Buy

Zacks Equity Research

On Mar 29, 2014, Zacks Investment Research upgraded Bemis Company, Inc. (BMS) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold) driven by decent fourth-quarter 2013 results, expected benefits from acquisitions, dividend hike and focus on growth initiatives.

Why the Upgrade?

Bemis has been witnessing positive estimate revisions on the back of decent fourth-quarter 2013 results. Adjusted earnings increased 4% year over year to 54 cents per share, benefiting from higher year-on-year volumes of high-barrier products across the globe. Earnings were also within management’s guidance range of 50–56 cents per share.

For 2014, earnings per share are projected to range between $2.40 and $2.55, which represents a year-over-year increase of 5% to 12% compared to last year. Management expects adjusted earnings in the range of 55 to 60 cents for the first quarter of 2014.

The board approved a 4% increase in regular quarterly dividend on Feb 6 — the 31st consecutive hike. The increase in distribution depicts the company’s continuous focus on healthy free cash flow generation and its balance sheet strength.

Recently, Bemis declared the divestment of its Paper Packaging Division to Hood Packaging Corporation. The sale of this division will allow the company to focus on strategic opportunities in high-barrier flexible packaging, medical and pharmaceutical packaging and developing geographic markets.

Bemis also announced the shutdown of one of its Pressure Sensitive Materials manufacturing facilities in Stow, OH. The company expects the plant closure to improve its competitiveness and help in long-term growth of its Pressure Sensitive Materials business.

Additionally, in Jul 2013, Bemis expanded its Asia-Pacific foothold with the purchase of Foshan New Changsheng Plastics Films Co. (“NCS”). The acquisition is expected to provide cost and logistics benefits to support Bemis expansion in the Asia-Pacific region.

These bullish factors led to upward estimate revisions in recent times. Over the last 60 days, five estimates out of nine moved up for the current year. The Zacks Consensus Estimate for 2014 climbed 2 cents to $2.46 per share and for 2015, the same increased 6 cents to $2.66 per share.

Another Stock to Consider

Some other stocks in the same sector that warrant a look includes Ball Corporation (BLL), Packaging Corporation of America (PKG) and Kimberly-Clark Corporation (KMB). While Ball Corporation and Packaging Corporation of America sport a Zacks Rank #1 (Strong Buy), Kimberly-Clark holds a Zacks Rank #2 (Buy).

Read the Full Research Report on KMB
Read the Full Research Report on BMS
Read the Full Research Report on BLL
Read the Full Research Report on PKG

Zacks Investment Research