Bemis Company, Inc. (BMS) reported earnings of 57 cents per share in fourth-quarter 2014, up 16% from 49 cents earned in the year-ago quarter. Earnings also beat the Zacks Consensus Estimate by a penny and came close to the upper end of the company’s guidance range of 53–58 cents.
Operational Update
Net sales slid 3% year over year to $1.053 billion and fell short of the Zacks Consensus Estimate of $1.085 billion. Excluding the impact of currency, acquisitions and divestitures, net sales increased 4.2% year over year.
Cost of products sold decreased 3.8% year over year to $844 million in the quarter. Gross profit increased to $208.5 million from $207.4 million in the year-ago quarter. Gross margin expanded 70 basis points (bps) to 19.8% in the quarter.
Selling, general and administrative expenses decreased 3.8% year over year to $101 million. Operating income increased 4.6% year over year to $98.5 million. Operating margin expanded 70 bps to 9.4% in the quarter.
Segment Performance
Net sales for the U.S. Packaging segment declined to $680 million, down 3.8% year over year. Adjusted segment operating profit declined to $87.7 million from $89.8 million in the prior-year quarter.
Net sales for the Global Packaging segment decreased 1.5% year over year to $372.7 million. Currency translation had a negative impact of 9.3%. Excluding the impact of currency translation, Global Packaging net sales increased 7.8% year over year, reflecting unit volume growth in addition to favorable sales price and mix. Adjusted segment operating profit rose 19.8% to $29.7 million from $24.8 million in the year-ago quarter.
Financial Update
Bemis had cash and cash equivalents of $47.1 million at the end of 2014 compared with $141.7 million at 2013-end. The company generated cash flow from operations of $248 million in 2014 compared with $373 million in 2013. The company’s total debt increased to $1.35 billion as of Dec 31, 2014 from $1.44 billion as of Dec 31, 2013.
In 2014, Bemis repurchased 3.8 million shares for $152.1 million. As of Dec 31, 2014, the approximate number of shares available for repurchase were 6.7 million shares.
Fiscal 2014 Performance
Bemis posted adjusted earnings of $2.30 per share for 2014, which increased 10% from $2.09 a share in 2013. Earnings beat the Zacks Consensus Estimate by a penny and came in line with management’s guidance range of $2.26 to $2.31 per share. Including special items, earnings were $2.36 per share for the year, compared with $1.85 in 2013.
Revenues for the full year decreased 3% year over year to $4.3 billion from $4.5 billion in 2013. Revenues also fell short of the Zacks Consensus Estimate of $4.5 billion.
2015 Outlook
Bemis expects adjusted earnings per share (EPS) in the range of $2.52 to $2.67 per share for 2015. Management estimates capital expenditure in the range of $185 to $200 million for 2015, which will invested to support increased customer demand for value-added products and further strengthen its competitive position.
Bemis remains optimistic about its growth initiatives in 2015. Focus on capital investments and incentive compensation programs will aid in achieving targeted performance metrics.
Business Update
On Sep 8, Bemis announced that it is selling its global Pressure Sensitive Materials (MACtac) business to a California-based private equity firm, Platinum Equity. The company concluded the sale of business for $170 million on Nov 7. The sale of this business will allow the company to focus on strategic opportunities in high-barrier flexible packaging, medical and pharmaceutical packaging.
Our Take
Bemis will benefit from healthy customer order levels and commercialization of new business at an accelerated pace, which will support expected unit volume and profit margin growth. Additionally, capacity expansion will also drive growth in demand for liquid and medical device packaging. Moreover, its product innovations have created positive momentum to support continued improvement in performance.
Bemis will also benefit from the recent slump in oil prices. Cheaper oil means lower gasoline prices. This, along with an improving employment scenario, will lead to a positive turn in consumer spending patterns and improve packaging demand, thereby facilitating Bemis’ growth. Moreover, resin, a derivative of oil, makes up almost a major portion of its cost of goods sold. Decline in resin prices will lead to meaningful margin expansion for Bemis.
Neenah, WI-based Bemis Company is a global manufacturer of flexible packaging products and pressure sensitive materials sold primarily to the food industry. The company also sells its products to other customers in the chemical, agri-business, medical, pharmaceutical, personal care, electronics, automotive, construction and graphic industries.
Currently, Bemis has a Zacks Rank #1 (Strong Buy). Other stocks worth a look in the industrial products sector include Berry Plastics Group, Inc. (BERY), Sealed Air Corporation (SEE) and Packaging Corporation of America (PKG). All these stocks carry a Zacks Rank #2 (Buy).
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