Berry Global (BERY) Down 8.3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Berry Global (BERY). Shares have lost about 8.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Berry Global due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Berry Global Q3 Earnings & Revenues Miss, Decline Y/Y
Berry Global reported third-quarter fiscal 2023 (ended Jul 1, 2023) adjusted earnings (excluding 72 cents from non-recurring items) of $1.90 per share, which missed the Zacks Consensus Estimate of $1.97. The bottom line decreased 6.4% year over year, primarily due to weakness in the consumer and industrial end markets.
Net sales of $3,229 million missed the Zacks Consensus Estimate of $3,461.6 million. The top line decreased 13.3% year over year due to a 7% dip in volumes, and lower selling prices, which declined $250 million due to the pass-through of lower resin costs. Reduced demand in the consumer and industrial markets led to the volume decline.
In the fiscal third quarter, Berry Global’s cost of goods sold decreased 14.7% to $2,649 million. Selling, general and administrative expenses remained flat year over year at $215 million. Berry Global reported an operating EBITDA of $522 million, down 5.1% year over year. Adjusted operating income in the quarter declined 9.2% year over year to $315 million.
Segmental Discussion
Consumer Packaging – International sales were $1,036 million (accounting for 32.1% of total sales), down 5.5% from the year-ago quarter. Our estimate for segmental revenues was $1056.7 million. The decline in sales was due to lower selling prices and volumes as a result of weakness in the industrial and consumer markets. Operating income of $68 million fell 17.1% year over year.
Consumer Packaging – North America’s sales were $798 million (accounting for 24.7% of total sales), down 13.9% year over year due to a 4% decline in volumes. Our estimate for segmental revenues was $863.8 million. Operating income dropped 14.4% year over year to $89 million.
Revenues generated from the Health, Hygiene & Specialties segment amounted to $657 million (accounting for 20.3% of total sales), down 16.6% year over year due to a 7% decrease in volumes as a result of lower demand in filtration and building and construction, and other specialty markets. Operating income of $22 million dropped 60.7% year over year.
Revenues from the Engineered Materials segment fell 19.3% year over year to $738 million (accounting for 22.8% of total revenues) due to an 11% decline in volumes as a result of inventory destocking, weakness in the European industrial markets and decreased selling prices. Operating income of $88 million decreased 6.4% year over year.
Balance Sheet and Cash Flow
At the end of third quarter of fiscal 2023, Berry Global had cash and cash equivalents of $633 million compared with $1,410 million at the end of fiscal 2022. Current and long-term debt totaled $9,212 million compared with $9,255 million at the end of fiscal 2022.
At the end of fiscal third quarter, Berry Global generated net cash of $490 million from operating activities compared with $345 million in the year-ago period. Capital expenditure totaled $560 million compared with $556 million in the year-ago quarter. Adjusted free cash outflow at the end of fiscal third quarter was $70 million compared with $211 million in the year-ago period.
In the first nine months of fiscal 2023, BERY repurchased 6.9 million shares for approximately $416 million. It also paid dividends of $97 million in the same period. The company expects to repurchase shares worth at least $600 million in fiscal 2023.
FY23 Guidance
Berry Global expects adjusted earnings of $7.30 per share in fiscal 2023. The Zacks Consensus Estimate for the same stands at $7.33.
BERY anticipates cash flow from operations of $1.45 billion in fiscal 2023. It expects free cash flow of $800 in the same period.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, Berry Global has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Berry Global has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Berry Global is part of the Zacks Containers - Paper and Packaging industry. Over the past month, AptarGroup (ATR), a stock from the same industry, has gained 2.6%. The company reported its results for the quarter ended June 2023 more than a month ago.
AptarGroup reported revenues of $895.91 million in the last reported quarter, representing a year-over-year change of +6.1%. EPS of $1.23 for the same period compares with $0.96 a year ago.
AptarGroup is expected to post earnings of $1.27 per share for the current quarter, representing a year-over-year change of +33.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.5%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for AptarGroup. Also, the stock has a VGM Score of B.
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