Packaging company Berry Global Group, Inc. (BERY) in Evansville, Ind., is a manufacturer and supplier of flexible, rigid, and non-woven products for use in consumer and industrial-end markets. The company functions through the broad segments of Consumer Packaging International; Consumer Packaging North America; Engineered Materials; and Health, Hygiene & Specialties.

On May 4, BERY and Taco Bell announced the launch of their new clear, all-plastic cup containing mechanically recycled post-consumer resin (PCR), designed for circularity. Tom Salmon, BERY’s chairman, and CEO, stated, “For years, we have collaborated with Taco Bell to make integral steps toward a more sustainable cup solution—one that is lighter weight, and proves the economic value and demand for recycled material, without compromising the product’s recyclability.”

BERY’s stock has declined 12.8% in price over the past year and 19.5% year-to-date to close yesterday’s trading session at $59.42. However, it has gained 4.4% over the past month and 2.6% intraday.

Here are the factors that could affect BERY’s performance in the near term:

Solid Financials

For its fiscal second quarter, ended April 2, BERY’s net sales increased 12% year-over-year to $3.78 billion. Its operating income has risen 2.4% from the prior-year quarter to $341 million. And its net income and net income per share have improved 13.3% and 13.6%, respectively, from the same period the prior year to $205 million and $1.50.

Low Valuations

In terms of its forward non-GAAP P/E, BERY is currently trading at 7.92x, which is 30.7% lower than the 11.43x industry average. The stock’s 0.50 forward Price/Sales multiple is 60.4% lower than the 1.27 industry average. In terms of its forward Price/Cash Flow, it is trading at 4.64x, which is 33.5% lower than the 6.99x industry average.

Favorable Growth Story

BERY’s revenue has grown at a 22.2% CAGR over the past three years and a 17.5% CAGR over the past five years. Over the past three years, its EBITDA, net income, and EPS have grown at a CAGR of 16.2%, 22.7%, and 21.2%, respectively. BERY’s total assets have grown at a 25% CAGR over the past three years.

Favorable Analysts Expectations

The $1.96 and $2.13 consensus EPS estimates for the quarters ending June 30, 2022, and Sept. 30, 2022, respectively, indicate a 28.1% and 37.4% year-over-year increase. Likewise, the consensus revenue estimate for the quarter ending September of $3.79 billion reflects a 3.2% improvement from the prior-year period.

The Street’s EPS $7.28 estimate for the fiscal year 2022 reflects a 25.5% rise year-over-year. The Street’s revenue estimate for the same year of $15.03 billion indicates an 8.5% increase  from the prior year. Its EPS is expected to increase 11.5% per annum over the next five years.

POWR Ratings Reflect Promising Prospects

BERY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

BERY has a B Value grade which is in sync with its discounted valuations. The stock has a C grade for Stability, which is consistent with its 1.26 five-year monthly beta. 

In the 21-stock Industrial – Packaging industry, it is ranked #11. The industry is rated A.

Click here to see the additional POWR Ratings for BERY (Growth, Momentum, Sentiment, and Quality).

View all the top stocks in the Industrial – Packaging industry here.

Click here to check out our Industrial Sector Report for 2022

Bottom Line

BERY’s recent collaboration with Taco Bell might help it reach its sustainability targets. In addition, the company’s top- and bottom-line growth streaks are impressive. Furthermore, its 25.08% trailing 12-month ROE is 90.6% higher than the 13.16% industry average. And with analysts bullish on BERY, I think the stock might be a solid bet now.

How Does Berry Global Group, Inc. (BERY) Stack Up Against its Peers?

While BERY has an overall POWR Rating of B, one might consider looking at its industry peers, Veritiv Corporation (VRTV) and Mondi plc (MONDY), which have an overall A (Strong Buy) rating.

BERY shares were trading at $59.47 per share on Friday morning, up $0.05 (+0.08%). Year-to-date, BERY has declined -19.40%, versus a -13.10% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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