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Berry Plastics (BERY) Gains on Q4 Earnings Beat, Y/Y Rise

Shares of Berry Plastics Group, Inc.BERY rose around 6.5% on Friday after the company reported its fourth-quarter fiscal 2015 results (ended Sep 26, 2015). Adjusted earnings from continuing operations improved 28% year over year to 50 cents per share in the quarter. Earnings also outpaced the Zacks Consensus Estimate of 45 cents.

Berry Plastics Group Inc. (BERY) - Earnings Surprise | FindTheCompany

Including one-time items, the company posted earnings of 39 cents per share, up from 24 cents in the year-ago quarter.

On the other hand, revenues in the quarter declined 9% to $1.20 billion compared to $1.31 billion a year ago. Revenues also missed the Zacks Consensus Estimate of $1.24 billion. The year-over-year decline in revenues was due to a decrease in selling prices as a result of the pass-through of lower raw material costs.

Operational Update

Cost of sales decreased 12.5% to $1 billion in the fourth quarter from $1.11 billion in the year-ago quarter. Gross profit went up 12.8% year over year to $221 million. Gross margin increased 510 basis points (bps) to 22.7%.

Selling, general and administrative expenses increased 19.7% year over year to $91 million. Adjusted operating income came in at $130 million, up from $120 million in the year-ago quarter, leading to a 170 bps expansion in operating margin to 10.9%.

Segmental Performance

Net sales from the Rigid Open Top segment were $271 million, compared with $290 million in the year-ago quarter. However, operating profit surged roughly 43% to $20 million from $14 million in the fourth quarter of fiscal 2014.

The Rigid Closed Top segment reported revenues of $353 million, down 10.9% from $396 million in the year-ago quarter. Operating earnings rose 12.9% year over year to $35 million.

The Engineered Materials segment sales went down 7.8% year over year to $345 million. Operating income grew 8.6% year over year to $38 million.

In the Flexible Packaging segment, sales declined 9.2% to $227 million from $250 million in the year-ago quarter. Segment operating income improved 7.7% year over year to $14 million.

Financial Updates

At the end of fiscal 2015, Berry Plastics had cash and cash equivalents of $228 million versus $129 million at the end of fiscal 2014. The company generated $637 million in cash from operating activities in fiscal 2015, compared with $530 million in fiscal 2014. Long-term debt was $3.7 billion as of Sep 26, 2015, compared with $3.9 billion as of Sep 27, 2014.

Recent Development

In Oct 2015, the company acquired 100% of the capital stock of AVINTIV, Inc. Avintiv is one of the world's leading developers, producers, and marketers of nonwoven specialty materials used in hygiene, infection prevention, personal care, and high-performance solutions. Avintiv's manufacturing facilities are strategically located worldwide near many key customers and utilize key raw materials similar to Berry Plastics' existing business.

To finance the purchase, Berry Plastics issued $400 million in aggregate principal amount of 6% second priority senior secured notes due 2022 and entered into an incremental assumption agreement to increase the commitments under the company's existing term loan credit agreement by $2.1 billion due 2022.

The buyout will help in strengthening Berry Plastics' leadership position in plastics packaging and engineered specialty materials, with enhanced technology, material and commercial capabilities. In addition, the acquisition will increase the company's presence in the faster growing health care and hygiene markets to better serve its customers.

Fiscal 2015 Performance

Berry Plastics posted adjusted earnings of $1.73 per share in fiscal 2015, up 12% year over year. Including one-time items, the company posted earnings of 70 cents per share, compared with 51 cents in the year-ago quarter.

Revenues for the full year decreased 14% to $4.88 billion from $4.96 billion in fiscal 2014, due to lower selling prices as a result of the pass-through of lower raw material costs, a negative impact from foreign currency changes, and soft customer demand in certain markets.

Outlook

Berry Plastics anticipates fiscal 2016 adjusted free cash flow to be $475 million, after deducting the $57 million payment in Oct 2015 under the company's tax receivable agreement. Capital spending and cash interest costs are forecasted at $285 million and $270 million, respectively, for the ongoing fiscal year.

Our View

Continued focus on driving organic and international growth, coupled with cost reduction actions, paves the way for Berry Plastics' future prospects. Going forward, Berry Plastics will remain focused on its key strategic initiatives to persistently drive shareholder value.

Evansville, IN-based Berry Plastics Group makes and sells plastic consumer packaging and engineered materials in the U.S., Canada, Mexico and several other countries around the world. The company sells its products to specialty businesses through its direct field sales force and distributors.

Zacks Rank

Berry Plastics currently carries a Zacks Rank #1 (Strong Buy). Some other stocks worth considering in the same industry are Advanced Emissions Solutions, Inc. ADES , Alarm.Com Holdings, Inc. ALRM and Cintas Corporation CTAS . All the three stocks hold a Zacks Rank #2 (Buy).

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CINTAS CORP (CTAS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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