Breaking News

Reasons Why Investors Should Avoid Berry Global Stock Now

By Zacks Investment ResearchOct 09, 2019 08:56AM ET
Reasons Why Investors Should Avoid Berry Global Stock Now
By Zacks Investment Research   |  Oct 09, 2019 08:56AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Berry Global Group, Inc. (NYSE:BERY) seems to have lost its sheen, thanks to a highly leveraged balance sheet, high cost of sales and uncertainties related to international operations.

The manufacturer and distributor of non-woven specialty materials, engineered materials and consumer packaging products currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company belongs to the Zacks Containers – Paper and Packaging industry, which is at the bottom 34% (with the rank of 168) of more than 250 Zacks industries. We believe that the industry is suffering from adverse impacts of higher costs related to transportation, raw material, fuel and chemical.

It is worth noting that Berry Global reported weaker-than-expected results for third-quarter fiscal 2019 (ended Jun 29, 2019), wherein earnings missed the Zacks Consensus Estimate by 10%. The bottom line also declined 6.3% on a year-over-year basis. The company’s average earnings surprise for the last four quarters was negative 4.14%.

A glance at Berry Global’s price trend in the past three months shows that it has lost nearly 30.2% compared with the industry’s and the Zacks Industrial Products sector’s declines of 10.2% and 5%, respectively. The S&P 500 dipped 1.5% during the same period.

The company’s earnings estimates were lowered, reflecting bearish sentiments. Over the past 60 days, the Zacks Consensus Estimate for Berry Global’s earnings has declined 3.8% to $3.33 for fiscal 2019 (ended September 2019) and 6.8% to $4.08 for fiscal 2020 (ending September 2020).

Berry Global Group, Inc. Price and Consensus

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

Factors Hurting the Stock’s Performance

Top-Line Weakness: The company’s third-quarter fiscal 2019 results suffered from weakness in the Engineered Materials, and Health, Hygiene & Specialties segments. Notably, supply disruption and industrial market softness adversely impacted the Engineered Materials segment while weakness in the North America baby care market and customer product transitions in hygiene impacted the Health, Hygiene & Specialties segment.

We believe that persistence of these issues along with lower resin prices, soft demand and forex woes might adversely impact the above-mentioned segments.

Cost-Related Woes: Berry Global is exposed to headwinds arising from the undue rise in the cost of sales due to higher raw material, transportation and manufacturing costs.

In the last three fiscal years (2016-2018), the company’s cost of sales rose 7.4% (CAGR) while a hike of 0.3% has been recorded for the nine months ended June 2019.

Headwinds Related to International Operations: Berry Global has operations in South America, North America, Asia and Europe. We believe that geographical diversification exposed it to headwinds arising from geopolitical issues, macroeconomic challenges and unfavorable movements in foreign currencies.

Notably, forex woes hurt the company’s sales by 0.8% in third-quarter fiscal 2019 while the similar impact of 1.1% was recorded in the second quarter.

Highly-Leveraged Balance Sheet: High debts can be concerning for Berry Global as it raises financial obligations and might adversely impact profitability.

The company’s long-term debt rose 0.5% (CAGR) in the last three fiscal years (2016-2018). Exiting third-quarter fiscal 2019, its long-term debt was approximately $5,468 million. Net interest expenses in the quarter were $71 million, higher than $67 million recorded in the year-ago quarter. Also, the company is more leveraged than the industry, with respective long-term debt-to-capital ratio of 77.9% and 57.6%.

It is worth mentioning here that the company is taking initiatives to repay debts. However, we believe that funding new investments and acquisitions will add to debt levels. For fiscal 2020, the company predicts interest expenses of approximately $500 million.

Berry Global’s Performance Versus Three Peers

The company underperformed its three industry peers — Graphic Packaging Holding Company (NYSE:GPK) , AptarGroup, Inc (NYSE:ATR) and Sealed Air Corporation (NYSE:SEE) . In the past three months, shares of Graphic Packaging have gained 0.3% while that of AptarGroup and Sealed Air declined 7.1% and 8%, respectively.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>

Berry Global Group, Inc. (BERY): Free Stock Analysis Report

Sealed Air Corporation (SEE): Free Stock Analysis Report

Graphic Packaging Holding Company (GPK): Free Stock Analysis Report

AptarGroup, Inc. (ATR): Free Stock Analysis Report

Original post
Reasons Why Investors Should Avoid Berry Global Stock Now
Reasons Why Investors Should Avoid Berry Global Stock Now

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email