Berry Global (BERY) Eyes Silver Lining, Risks Remain – May 20, 2022


Berry Global Group, Inc. (BERY Free report) is likely to benefit from its presence in diversified end markets which allows it to negate the risks associated with a single market. Strength in BERY’s end markets, including food, beverage, health and pharmaceutical, and others, should drive its performance in the coming quarters. In addition, its strong product portfolio and organic growth investments should be beneficial in the coming quarters.

BERY follows a balanced capital allocation strategy, which allows it to use cash flow for acquisitions and debt repayment. The business acquired by Berry Global from the RPC Group (July 2019) boosted its growth opportunities in the recycled packaging and plastics industry. Additionally, BERY repaid long-term debt of $3,496 million and $9 million in fiscal 2021 and the first six months of fiscal 2022, respectively.

Berry Global is also poised to cash in on its growth investments. His investments in the latest equipment technology and design for circularity continue to enhance his skills. Recently, BERY has also started construction of a second manufacturing plant and a global healthcare center in Sira, Bangalore. Once complete, the facility will strengthen its research and development expertise and boost production in several major healthcare sectors.

Berry Global believes in generously rewarding its shareholders through share buybacks. BERY announced a $1 billion share buyback program in February 2022. BERY repurchased $350 million worth of shares in the first half of fiscal 2022. BERY still had $700 million of shares to be repurchased from its previously announced $1 billion share buyback plan. the second quarter of fiscal year 2022.

However, Berry Global is witnessing the negative effects of escalating costs and operating expenses. BERY’s cost of sales increased 16.6% in the second quarter of fiscal 2022 on a year-over-year basis. Headwinds from raw material inflation and other costs and challenges related to labor and supply chain constraints are expected to persist in the near term, which could affect its margins and profitability.

BERY’s global presence exposes it to various environmental laws and regulations in the countries where it operates. The entity also remains vulnerable to currency and geopolitical issues. Forex woes hampered sales by $64 million year-over-year in the fiscal second quarter. Berry Global’s overseas operations could be impacted by a stronger US dollar in the coming quarters.

Image source: Zacks Investment Research

Over the past three months, this currently ranked No. 3 stock of Zacks (Hold) has fallen 12.4% compared to the industry’s 2.3% decline.

Zacks Ranking and Stocks to Consider

Some top-ranked companies in the industrial products sector are featured below.

Applied Industrial Technologies, Inc. (AIT Free Report) currently sports a No. 1 Zacks rank. AIT has delivered a four-quarter earnings surprise of 25.4% on average. You can see today’s full list of Zacks #1 Rank (Strong Buy) stocks here.

AIT’s earnings estimates have risen 5.9% for fiscal year 2022 (ending June 2022) over the past 60 days. Its shares are up 4.9% over the past three months.

Roper Technologies, Inc. (ORP Free Report) currently has a Zacks Rank #2 (Buy). Its earnings surprise over the past four quarters averaged 2%.

Over the past 60 days, ROP earnings estimates have risen 1.1% for 2022. The stock has fallen 6.1% over the past three months.

Ferguson plc (FERG Free Report) is currently ranked #2 in Zacks. FERG’s earnings surprise over the past four quarters averaged 14.2%.

Over the past 60 days, earnings estimates for the stock have risen 2.8% for fiscal year 2022 (ending July 2022). The same has decreased by 22.4% in the last three months.

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