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Berry Global (BERY) Q3 Earnings Top Estimates, Revenues Miss

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Berry Global Group, Inc. BERY reported mixed results for third-quarter fiscal 2022 (ended June 2022). BERY’s earnings beat the Zacks Consensus Estimate by 3.6%, whereas sales missed the same by 2.5%.

In the reported quarter, Berry Global’s adjusted earnings were $2.03 per share, beating the Zacks Consensus Estimate of $1.96. On a year-over-year basis, the bottom line increased 32.7% from the year-ago quarter’s figure of $1.53 on sales improvement.

Revenue Details

In the quarter under review, BERY’s net sales were $3,726 million, reflecting year-over-year growth of 1%. Effective pricing increased sales by $301 million, partially offset by $151 million of forex and $16 million of divestiture impacts. Lower volumes left a negative impact of 2%.

Berry Global’s top line missed the Zacks Consensus Estimate of $3,823 million.

BERY reports results under four segments, namely Consumer Packaging, International, Consumer Packaging — North America, Health, Hygiene & Specialties, and Engineered Materials.

A brief snapshot of segmental sales for the fiscal third quarter is provided below:

Consumer Packaging – International sales were $1,096 million, up 12% from the year-ago quarter’s level. The results benefited from effective pricing actions, which boosted sales $138 million. However, divestitures and forex woes had adverse impacts of $16 million and $99 million, respectively. The segment accounted for 29.4% of the quarter’s net sales.

Consumer Packaging – North America’s sales were $926 million, increasing 9% year over year. The metric accounted for 24.9% of the quarter’s net sales.

Revenues generated from Health, Hygiene & Specialties amounted to $788 million, down 3% year over year due to a 3% volume decline and a $17-million adverse impact from forex woes. The segment accounted for 21.1% of the quarter’s net sales.

Revenues from Engineered Materials grew 5% year over year to $915 million. Increased pricing boosted sales $81 million. Volume declines lowered sales 4% and a $35-million adverse impact from forex woes was worrisome. The segment accounted for 24.6% of the quarter’s net sales.

Berry Global Group, Inc. Price and Consensus

Berry Global Group, Inc. Price and Consensus
Berry Global Group, Inc. Price and Consensus

Berry Global Group, Inc. price-consensus-chart | Berry Global Group, Inc. Quote

Margin Profile

In the fiscal third quarter, Berry Global’s cost of goods sold increased 1.8% to $3,105 million. The metric represented 83.3% of net sales compared with 83% in the year-ago quarter. Selling, general and administrative expenses increased 3.9% to $215 million and represented 5.8% of net sales.

Operating earnings before interest, tax, depreciation and amortization (EBITDA) were $550 million, down 3% year over year. The EBITDA margin was 14.8% compared with 15.4% in the year-ago quarter.

Adjusted operating income in the quarter decreased 1.7% year over year to $347 million. Adjusted operating margin was 9.3%, down 30 basis points. Interest expenses, net, were $70 million, down 7.9% year over year. Labor issues, supply-chain woes and cost inflation were spoilsports in the quarter.

Balance Sheet and Cash Flow

While at the time of exiting third-quarter fiscal 2022, Berry Global’s cash and cash equivalents were $527 million, down 51.7% from $1,091 million at the end of fourth-quarter fiscal 2021 (ended September 2021). Current and long-term debt increased 0.5% to $9,503 million from $9,460 million reported at the end of fourth-quarter fiscal 2021.

In the first nine months of fiscal 2021, BERY repaid $16 million of long-term borrowings.

In the fiscal third quarter, Berry Global generated net cash of $359 million for its operating activities compared with net cash of $274 million generated in the year-ago fiscal quarter. Capital expenditure totaled $191 million compared with $155 in the year-ago quarter. Free cash flow in the quarter was $168 million compared with $119 million generated in the comparable quarter a year ago.

Share repurchases in the first nine months amounted to $837 million.

Outlook

Berry Global is focused on creating organic growth opportunities and improving the balance sheet. Demand across businesses like foodservice, dispensing solutions, health, personal care and pharmaceutical is expected to be strong in the quarters ahead. Foreign currency woes, 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, adjusted earnings per share are predicted to be $7.40 compared with $7.20-$7.70 anticipated earlier.

Free cash flow will likely be $900-$1,000 million for fiscal 2022. Cash flow from operations is expected to be $1.5 billion, while capital expenditure is estimated at $750 million.

For the fiscal fourth quarter, management expects organic sales growth in low-single-digit from the same-period level last year.

Zacks Rank & Stocks to Consider

BERY currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the industrial products sector are discussed below:

Greif, Inc. GEF presently sports a Zacks Rank #1 (Strong Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

GEF’s earnings estimates have increased 17.8% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 21% in the past six months.

Titan International, Inc. TWI presently flaunts a Zacks Rank of 1. Its earnings surprise in the last four quarters was 47%, on average.

In the past 60 days, TWI’s earnings estimates have increased 52.2% for 2022. The stock has surged 47% in the past six months.

Valmont Industries, Inc. VMI presently has a Zacks Rank #2 (Buy). VMI’s earnings surprise in the last four quarters was 13.7%, on average.

In the past 60 days, Valmont’s earnings estimates have increased 3.8% for 2022. The stock has rallied 29.2% in the past six months.


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