Bemis (BMS) Poised To Grow On Inorganic Growth, Risks Remain

We have issued an updated research report on Bemis Company, Inc. (NYSE:BMS) on May 24, 2016. The company will benefit from its continuous focus on strategic initiatives, cost controls and acquisitions. However, Bemis’ performance will be hurt by foreign currency headwinds, fluctuations in raw material prices and strong competition.

Notably, Bemis has made numerous acquisitions in the past and continues to pursue new deals that can provide meaningful opportunities to grow its business. In 2015, it acquired Emplal Participações S.A, in line with its growth strategy to expand into the South American markets. The acquisition will be modestly accretive to earnings per share in 2016.

Bemis also acquired SteriPack Group, a global manufacturer of sterile packaging solutions for medical devices and pharmaceutical applications on May 2. This acquisition includes a facility in Ireland as well as packaging production assets in Malaysia and the U.S. The buyout is a fit for Bemis, strategically and geographically. Bemis believes that more of such acquisitions will improve its competitive edge and future financial performance.

Bemis has implemented corrective actions within the Latin America's rigid business as it did not perform well operationally during the first quarter of 2016. Last year, it embarked on the closure of its healthcare packaging facility in Philadelphia and the expansion of its facility in Oshkosh that will elevate its industry leading quality and support additional growth. As planned, the Philadelphia plant closed in January this year and the company relocated the final remaining converting assets to Oshkosh. These actions will support the company’s growth.

The company also reaffirmed its long-term view of EPS growth of 10% and more per year, balanced organic and inorganic revenue growth, and operating profit margins of 15–18% in U.S. Packaging. Further, in the Global Packaging segment, margins are projected to increase to greater than 10% over the next three to five years.

However, Bemis expects full-year adjusted diluted earnings per share to be in the range of $2.68–$2.78, compared to $2.68–$2.83 expected earlier. It lowered the upper end of the full-year EPS guidance range due to the impact of operational inefficiencies on the company’s Latin American business and the North American healthcare business.

Bemis remains concerned that foreign currency headwinds would persist through the rest of the year. Given that the company has a significant footprint in Latin America, the majority of the headwind from the Brazil Real will occur in the first two quarters of 2016. Moreover, fluctuations in raw material prices and strong competition also remain concerns.

At present, Bemis carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked stocks in the sector include Berry Plastics Group, Inc. (NYSE:BERY) , Crown Holdings Inc. (NYSE:CCK) and Sonoco Products Co. (NYSE:SON) . All these stocks carry a Zacks Rank #2 (Buy).


CROWN HLDGS INC (CCK): Free Stock Analysis Report

SONOCO PRODUCTS (SON): Free Stock Analysis Report

BEMIS (BMS): Free Stock Analysis Report

BERRY PLASTICS (BERY): Free Stock Analysis Report

Original post

Zacks Investment Research