Berry Global (BERY) Q1 Earnings Miss Estimates, Revenues Beat
Berry Global Group, Inc. BERY reported mixed results for first-quarter fiscal 2022 (ended December 2021). The company’s earnings lagged the Zacks Consensus Estimate by 9.42%, whereas sales surpassed the same by 5.31%.
In the reported quarter, the company’s adjusted earnings were $1.25 per share, lagging the Zacks Consensus Estimate of $1.38. On a year-over-year basis, the bottom line decreased 15.5% from the year-ago quarter’s figure of $1.48. Higher sales impacts were more than offset by labor issues, supply-chain woes, and cost inflation.
Revenue Details
In the quarter under review, the company’s net sales were $3,573 million, reflecting year-over-year growth of 13.9%. Effective pricing increased sales by $706 million, partially offset by $17 million of forex, $112 million of shipping days and $48 million of divestiture impacts. Lower volumes left a negative impact of 3%.
Berry Global’s top line surpassed the Zacks Consensus Estimate of $3,393 million.
The company reports results under four segments — Consumer Packaging–International, Consumer Packaging–North America, Health, Hygiene & Specialties, and Engineered Materials. A brief snapshot of fiscal first-quarter segmental sales is provided below:
Consumer Packaging–International’s sales were $1,056 million, up 6.9% from the year-ago quarter. The results benefited from effective pricing actions, which boosted sales by $116 million. However, volumes declines lowered sales by 1%, while divestitures and forex woes had adverse impacts of $14 million and $16 million, respectively. It accounted for 29.6% of the quarter’s net sales.
Consumer Packaging–North America’s sales were $852 million, increasing 24.2% year over year. Effective pricing actions increased sales by $216 million, while a 2% decline in volumes and a $34-million adverse sales impact from shipping days played spoilsport. It accounted for 23.8% of the quarter’s net sales.
Revenues generated from Health, Hygiene & Specialties amounted to $818 million, up 10.5% year over year. Effective pricing actions contributed $143 million to sales, while a 4% volume decline and a $36-million adverse impact from shipping days were worrisome. It accounted for 22.9% of the quarter’s net sales.
Revenues from Engineered Materials grew 17.3% year over year to $847 million. Increased pricing boosted sales by $231 million and divestitures lowered sales by $34 million. Volume declines lowered sales by 4% and shipping days had an adverse impact of $37 million. It accounted for 23.7% of the quarter’s net sales.
Margin Profile
In the fiscal first quarter, Berry Global’s cost of goods sold increased 20.7% to $3,038 million. It represented 85% of net sales compared with 80.3% in the year-ago quarter. Selling, general and administrative expenses decreased 2.5% to $235 million and represented 6.6% of net sales.
Operating earnings before interest, tax, depreciation and amortization (EBITDA) was $457 million, down 15.2% year over year. The EBITDA margin was 12.8% compared with 17.2% in the year-ago quarter.
Adjusted operating income in the quarter decreased 24.1% year over year to $246 million. Adjusted operating margin was 6.9%, down 340 basis points. Interest expenses, net, were $71 million, down 26.8% year over year. Labor issues, supply-chain woes, and cost inflation played spoilsports in the quarter.
Balance Sheet and Cash Flow
Exiting first-quarter fiscal 2022, Berry Global’s cash and cash equivalents were $582 million, down 46.7% from $1,091 million in the previous quarter. Current and long-term debt decreased 0.3% to $9,431 million from the previous quarter.
In the quarter, the company repaid $5 million of long-term borrowings.
In the fiscal first quarter, Berry Global used net cash of $304 million for its operating activities against net cash of $315 million generated in the year-ago quarter. Capital expenditure totaled $162 million, the same as the year-ago quarter. Free cash outflow in the quarter was $466 million against $153 million generated in the comparable quarter a year ago.
Share repurchases in the quarter amounted to $51 million. Concurrent with the earnings release, the company announced that its board of directors approved a $1-billion share buyback program. It intends on buying back $350 million worth of shares in fiscal 2022 (ending September 2022).
Outlook
Berry Global is focused on creating organic growth opportunities and improving the balance sheet. Demand across businesses, e-commerce, health, food safety and wellness is expected to be strong in the quarters ahead. Labor problems, supply-chain issues and cost inflation are predicted to persist in fiscal 2022. However, moderation in cost inflation and improvements in the supply chain are predicted.
For fiscal 2022, it expects organic sales growth to be 2% year over year. Adjusted earnings per share are predicted to be $7.20-$7.70 and the effective tax rate will likely be 25%
Free cash flow will likely be $900-$1,000 million for fiscal 2022. Cash flow from operations is expected to be $1,700-$1,800 million and capital expenditure to be $800 million.
Berry Global Group, Inc. Price, Consensus and EPS Surprise
Berry Global Group, Inc. price-consensus-eps-surprise-chart | Berry Global Group, Inc. Quote
Zacks Rank &Other Important Earnings Releases
With a market capitalization of $9.1 billion, Berry Global currently carries a Zacks Rank #3 (Hold).
Three other companies from the industry to soon report results are discussed below:
UFP Technologies, Inc. UFPT will likely release fourth-quarter results on Mar 3. It presently sports a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
The company reported better-than-expected results in three of the last four quarters and lagging estimates once. The earnings surprise for UFPT was 22.90%, on average. In the past 60 days, the Zacks Consensus Estimate for UFP Technologies’ fourth-quarter earnings has increased 26.5% to 62 cents.
Sealed Air Corporation SEE will release fourth-quarter results on Feb 17, before market open. It presently carries a Zacks Rank #2 (Buy).
The company reported better-than-expected results in three of the last four quarters and lagging estimates once. The earnings surprise for SEE was 6.54%, on average. In the past 60 days, the Zacks Consensus Estimate for Sealed Air’s fourth-quarter earnings has been unchanged at $1.14.
Sonoco Products Company SON is slated to release fourth-quarter results on Feb 10, before market open. It presently carries a Zacks Rank #2.
In the last four quarters, the company recorded better-than-expected results thrice and missed estimates once. SON pulled off a trailing four-quarter earnings surprise of 3.08%, on average. The Zacks Consensus Estimate for Sonoco’s fourth-quarter earnings has been increased by 1.1% in the past 60 days.
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