On Dec 24, 2015, we issued an updated research report on Bemis Company, Inc. BMS, a global manufacturer of flexible packaging products and pressure sensitive materials that are sold primarily to the food industry.
Bemis’ third-quarter 2015 adjusted earnings rose 9.8% year over year led by continued progress in the implementation of long-term strategies and strong operational performance.
However, the company trimmed the upper end of its adjusted earnings per share (EPS) guidance for 2015 to the range of $2.52 to $2.57 from the prior band of $2.52 to $2.62, reflecting the impact of currency translation. Through the first three quarters of 2015, currency translation has resulted in a year-over-year loss of 17.5% of its profits or approximately 12 cents of EPS. Bemis remains concerned about foreign currency headwinds and anticipates them to persist through the rest of the year.
U.S. Packaging, which represents about two-thirds of Bemis’ total business, witnessed a sales decline of 3.7% year over year in the third quarter due to a decline in overall unit volumes. Weak non-durable consumer spending and inflation of food & beverage items, along with consumers’ preference for healthy or fresh food alternatives over processed foods, could continue to keep volumes subdued in the company’s key end markets. This tough volume environment will continue to weigh on Bemis’ results.
Bemis’ however raised its full-year outlook for cash flow from operations to $500 million from $400 million and retained its capital expenditure guidance in the range of $200 million to $215 million for 2015 to support productivity and efficiency projects as well as growth projects driven by increased customer demand for value-added products.
Reaffirming its long-term view, Bemis continues to target EPS growth of 10% and more per year, balanced organic and inorganic revenue growth, operating profit margins at 15% to 18% in U.S. Packaging, and over 10% in Global in the next three to five years. Further, the company expects ROIC in the top quartile by 2019 and cash from organic operations to exceed $550 million by 2019. The company remains confident about delivering these long-term goals.
The company is also making progress in several growth and productivity projects which will come online in the near term, and support both revenue and continued margin improvement from 2016 onward. Additionally, execution of capital projects will support the growing demand for high-end packaging used for protein, liquid and medical applications.
Bemis currently carries Zacks Rank #3 (Hold). Some better-ranked stocks in the industrial products sector are Brady Corp. BRC, ScanSource, Inc. SCSC and Codexis, Inc. CDXS. All these stocks sport a Zacks Rank #1 (Strong Buy).
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