Berry Global Group, Inc. BERY reported weaker-than-expected results for second-quarter fiscal 2019 (ended Mar 30, 2019), with a negative earnings surprise of 14.3%.
The company’s adjusted earnings were 84 cents per share, flat year over year. However, the bottom line missed the Zacks Consensus Estimate of 98 cents.
Berry Global’s net sales were $1,950 million, reflecting year-over-year decline of 0.9%. The fall was primarily attributable to 3.7% decline in organic sales and 1.1% negative impact from unfavorable movements in foreign currencies, partially offset by 3.9% gain from acquired assets.
Berry Global Group, Inc. Price, Consensus and EPS Surprise
Berry Global Group, Inc. Price, Consensus and EPS Surprise | Berry Global Group, Inc. Quote
Notably, the top line lagged the Zacks Consensus Estimate of $2.06 billion.
The company reports revenues under the following segments — Consumer Packaging, Health, Hygiene & Specialties, and Engineered Materials. A brief snapshot of the segmental sales is provided below:
Consumer Packaging’s sales were roughly $639 million, reflecting year-over-year growth of 6%. The rise was primarily driven by volume improvement and increased selling prices. It accounted for 32.8% of the reported quarter’s net sales.
Revenues generated from Health, Hygiene & Specialties amounted to $683 million, decreasing 3%. The fall was attributable to organic sales decline and unfavorable movements in foreign currencies. It accounted for 35% of the reported quarter’s net sales.
Revenues from Engineered Materials declined 4% year over year to $628 million. Notably, the fall was due to decline in organic sales owing to customer destocking and supply disruption. It accounted for 32.2% of the reported quarter’s net sales.
In the reported quarter, Berry Global’s cost of goods sold decreased 1.1% to $1,578 million. It represented 80.9% of net sales versus 81.1% in the year-ago quarter. Selling, general and administrative expenses grew 1% to $143 million, and represented 7.3% of net sales.
Adjusted operating income in the quarter under review increased 1.8% year over year to $229 million. Moreover, adjusted operating margin improved 30 basis points to 11.7%. Interest expense was flat at $66 million.
Balance Sheet & Cash Flow
Exiting second-quarter fiscal 2019, Berry Global’s cash and cash equivalents were $353 million, up 21.3% from $291 million recorded in the year-ago quarter. Current and long-term debt decreased 2% to $5,727 million from Sep 29, 2018.
In the first six months of fiscal 2019, the company generated net cash of $331 million from operating activities, reflecting increase of 16.1% from the year-ago period. Capital invested for the purchasing of property, plant and equipment totaled $167 million versus $184 million in the year-ago quarter. Adjusted free cash flow in the reported quarter was $78 million, up from $42 million.
During the quarter under review, the company repurchased shares worth $18 million. Exiting the quarter, the company had $393 million of buyback authorization outstanding.
For fiscal 2019 (ending September 2019), Berry Global reaffirmed cash flow projections. It predicts adjusted free cash flow of approximately $670 million, with cash flow from operations of $1,036 million and capital expenditure of approximately $350 million.
Interest expenses in the fiscal year are predicted to be $270 million while taxes are estimated to be $150 million. Moreover, capital will be used for making acquisitions, investing in organic growth opportunities and buying back shares.
Zacks Rank & Stocks to Consider
Berry Global currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the space are DXP Enterprises, Inc. DXPE, Cintas Corporation CTAS and Dover Corporation DOV. While DXP Enterprises sports a Zacks Rank #1 (Strong Buy), Cintas and Dover carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
DXP Enterprises exceeded estimates thrice in the trailing four quarters, the average beat being 46.55%.
Cintas surpassed estimates in each of the trailing four quarters, the average beat being 6.09%.
Dover surpassed estimates in each of the trailing four quarters, the average beat being 8.61%.
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