Here's Why You Should Hold Onto Bemis (BMS) Stock For Now

Bemis Company, Inc. (NYSE:BMS) remains well poised for growth, banking on its initiatives to improve cost structure through the Agility plan, as well as focus on restructuring activities. However, raw material inflation and rising expenses remain concerns.

The manufacturer of flexible packaging products and pressure-sensitive materials, with a market capitalization of approximately $3.9 billion, currently carries a Zacks Rank #3 (Hold).

Below, we briefly discuss the company’s potential growth drivers and possible headwinds.

Factors Favoring Bemis

Value Growth Momentum (VGM) Score

Bemis currently has a Zacks VGM score of B. Here V stands for Value, G for Growth and M for Momentum. Such a score allows you to eliminate the negative aspects of stocks and select winners. The VGM Score of B, along with some other key metrics, makes the company a solid choice for investors.

Positive Earnings Surprise History

Bemis has surpassed the Zacks Consensus Estimate in three out of the last four quarters, with an average beat of 0.84%.

Return on Assets (ROA)

Bemis currently has a ROA of 5.9%, while the industry's ROA is 5.1%. An above-average ROA denotes that the company is generating earnings by effectively managing assets.

Growth Drivers in Place

Bemis is expected to benefit from its focus on Agility plan. The plan includes optimizing manufacturing capacity, consolidating office space, and reducing SG&A and other costs. It also involves the simplification of product portfolio and organizational structure, rebalancing R&D efforts, and pursuing targeted areas of growth in the North American business. Bemis expects to realize roughly $35 million of savings from the plan.

During second-quarter 2017, Bemis started adopting restructuring measures to improve efficiency and drive profits through the closure of a few manufacturing facilities, consolidation of office space and retrenchment of some administrative positions. The restructuring plan is expected to be completed by the end of 2019, leading to annual pre-tax savings of $65 million.

Headwinds

Bemis expects to witness material price inflation of 2-3% globally, as well as the impact of exceeding annual pay for performance targets, in 2018. In Latin America, specifically, the company will experience a raw material headwind due to the current economic environment.

Further, the company anticipates that its selling, general and administrative expenses will flare up year over year in 2018. It also estimates total restructuring and other plan-related cash payments related to the 2017 restructuring plan to be around $75-$85 million.

Price Performance

The company has underperformed the industry it belongs to in the past year. The stock has lost around 3%, while the industry recorded growth of 7%.

Bottom Line

Investors might want to hold on to the stock, at present, as it has ample prospects of outperforming peers in the near future.

Stocks to Consider

Some better-ranked stocks in the same sector are Axon Enterprise, Inc (NASDAQ:AAXN) , Caterpillar Inc. (NYSE:CAT) and Terex Corp. (NYSE:TEX) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Axon Enterprise has a long-term earnings growth rate of 25%. Its shares have appreciated 134%, over the past year.

Caterpillar has a long-term earnings growth rate of 13.3%. The company’s shares have been up 52%, in the past year.

Terex has a long-term earnings growth rate of 20.2%. The stock has gained 26% in a year’s time.

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