Bemis (BMS) Shares Up 21% YTD: What's Driving The Rally?

Shares of Bemis Company, Inc. (NYSE:BMS) have rallied 20.8% year to date on solid earnings growth prospects, focus on Agility plan, as well as improving operating performance and expansion of business.

Bemis, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $5 billion. The company has an expected long-term earnings per share growth rate of 7.30%.

The company outpaced the Zacks Consensus Estimate in two of the trailing four quarters, average positive earnings surprise being 3.35%. The stock’s 20.8% year-to-date rise outperformed the industry’s growth of 18.0%.

Let’s delve deeper and analyze the reasons behind the company’s impressive price performance and find out if there is room for further appreciation:

What’s Driving Bemis?

Bemis’ initiatives to improve cost structure through the Agility plan will help fix, strengthen, and grow its business. The plan includes optimizing manufacturing capacity, consolidating office space, and reducing SG&A, as well as other costs.

As part of this three-pronged approach, the “fix” aspect involves restructuring and cost-savings plan target of $65 million pre-tax by the end of 2019. The “strengthen and grow” aspects of Agility includes simplifying product portfolio and organizational structure, rebalancing R&D efforts to focus on manufacturing improvements, and deliberately pursuing targeted areas of growth in the North American business. These actions will lay the foundation for the company’s future growth.

The company expects Agility to be a key driver this year. In the U.S. business, it expects modest top and bottom-line growth in 2019, including the benefits of Agility. The Rest of World business will witness top and bottom-line growth, aided by the global health-care packaging business.

Bemis remains focused on improving its operating performance and expansion of business. In August 2018, Amcor and Bemis announced to merge their operations in a $6.8-billion all-stock transaction. The merger will create a global leader in consumer packaging. The combined entity will have a worldwide presence, with a broader product portfolio, increased product differentiation, as well as enhanced operating capabilities. Bemis’ shareholders will benefit from the projected increase in dividend, which has nearly doubled from the current dividend rate. The merger will provide $180 million of cost synergies identified as part of the transaction. The company remains on track to close the deal in second-quarter 2019.

Bemis remains committed to maintain a strong balance sheet and returning free cash flow to shareholders. On Feb 7, the company announced an increase of 3.2% in the quarterly cash dividend to 32 cents per share. This marks the 36th consecutive year that the company has increased its dividend payment. Bemis has been paying an annual dividend on its stock since 1922 and has been included in Standard & Poor's list of Dividend Aristocrats since 2008.

Healthy Growth Projections: The Zacks Consensus Estimate for Bemis’s 2019 earnings is currently pegged at $2.99, reflecting year-over-year growth of 7.2%. The same for 2020 stands at $3.11, indicating a year-over-year rise of 4.2%.

Return on Assets (ROA)

Bemis currently has a ROA of 7%, while the industry's ROA is 6%. An above-average ROA denotes that the company is generating earnings by effectively managing assets.

Bemis Company, Inc. Price and Consensus

Stocks to Consider

A few better-ranked stocks in the Industrial Products sector are Mueller Industries, Inc (NYSE:MLI) , Lawson Products, Inc. (NASDAQ:LAWS) and Albany International Corp. (NYSE:AIN) , each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mueller Industries has an expected earnings growth rate of 2.2% for 2019. The company’s shares have rallied 23.2%, over the past year.

Lawson Products has an outstanding projected earnings growth rate of 102.5% for the current year. The stock has appreciated 28.8% in a year’s time.

Albany International has an estimated earnings growth rate of 44.7% for the ongoing year. The company’s shares have gained 15.7%, in the past year.

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