A month has gone by since the last earnings report for Berry Global (BERY). Shares have lost about 2% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Berry Global Q4 Earnings & Revenues Top Estimates
Berry Global reported better-than-expected fourth-quarter fiscal 2020 (ended Sep 26, 2020) results. Its earnings surpassed estimates by 28.23% — this being the fifth consecutive quarter of earnings beat. Also, the quarter’s sales topped estimates by 1.74%.
The company’s adjusted earnings in the reported quarter of $1.59 per share surpassed the Zacks Consensus Estimate of $1.24. Also, the bottom line surged 76.7% from the year-ago number of 90 cents.
In fiscal 2020, the company’s adjusted earnings were $4.85, up 42.2% from the year-ago figure of $3.41.
In the quarter under review, Berry Global’s net sales were $3,008 million, reflecting year-over-year decline of 0.4%. The decline was attributable to $152 million adverse impacts of a fall in selling prices, partially offset by 4% growth in organic volumes and positive impact of $34 million from favorable movements in foreign currencies.
Notably, the top line surpassed the consensus estimate of $2,957 million.
In fiscal 2020, its net sales came in at $11,709 million, an increase of 31.9% from the year-ago number of $8,878 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 fourth-quarter segmental sales is provided below:
Consumer Packaging–International’s sales were $1,071 million compared with $1,077 million in the year-ago quarter. The decrease was attributable to $55 million adverse impacts of a decline in selling prices, partially offset by 1% growth in organic volumes and positive impact of $39 million from favorable movements in foreign currencies. It accounted for 35.6% of the quarter’s net sales.
Consumer Packaging–North America’s sales were $746 million, up 0.3% year over year. The increase was attributable to 6% rise in organic volumes, partially offset by $43 million adverse impacts of a decline in selling prices. It accounted for 24.8% of the quarter’s net sales.
Revenues generated from Health, Hygiene & Specialties amounted to $604 million, up 6% year over year. The improvement was driven by 12% increase in organic volumes, partially offset by adverse impact of $19 million from lower selling prices and divestiture. It accounted for 20.1% of the quarter’s net sales.
Revenues from Engineered Materials declined 6.5% year over year to $587 million. The fall was due to $35 million adverse impacts of lower selling prices and 1% of volume decline. It accounted for 19.5% of the quarter’s net sales.
In the fiscal fourth quarter, Berry Global’s cost of goods sold decreased 6.7% to $2,342 million. It represented 77.9% of net sales compared with 83.2% in the year-ago quarter. Selling, general and administrative expenses rose 10.1% to $219 million and represented 7.3% of net sales.
Adjusted operating income in the quarter increased 33.7% to $385 million. Also, adjusted operating margin came in at 12.8%, up 330 basis points year over year. Net interest expenses were $96 million, down 25%.
Balance Sheet & Cash Flow
Exiting fiscal 2020, Berry Global’s cash and cash equivalents were $750 million, down 17.2% from $906 million in the previous quarter. Current and long-term debt decreased 4.9% to $10,237 million sequentially.
In fiscal 2020, the company repaid $2,436 million of borrowings. Its proceeds from borrowings totaled $1,202 million.
In the reported quarter, it generated net cash of $552 million from operating activities, down 12.4% from the year-ago quarter. Capital expenditure totaled $165 million, increasing 28.9% from $128 million spent in the year-ago quarter. Free cash flow in the quarter declined 19.4% to $387 million.
For fiscal 2021 (ending September 2021), Berry Global anticipates to generate organic sales growth of 2% on a year-over-year basis, with operating EBITDA in the range of $2.15-$2.2 billion.
For fiscal 2021, Berry Global predicts a free cash flow in the range of $875-$975 million, with cash flow from operations of $1,525-$1,625 million and capital expenditure of $650 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 22.45% due to these changes.
Currently, Berry Global has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been 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.
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