What's In The Cards For Berry Global (BERY) In Q1 Earnings?

Berry Global Group, Inc. (NYSE:BERY) is slated to report first-quarter fiscal 2020 (ended December 2019) results on Jan 31, before market open.

The company reported better-than-expected results twice in the last four quarters, the positive earnings surprise being 0.70%, on average. Berry Global’s fourth-quarter fiscal 2019 (ended September 2019) adjusted earnings of 90 cents per share outpaced the Zacks Consensus Estimate of 74 cents by 21.62%.

Over the past three months, the company’s shares have gained 8.3% compared with 2.2% growth recorded by the industry it belongs to.

Factors at Play

Berry Global is likely to have benefited from its solid product offerings across its strong customer base in the fiscal first quarter. In the fiscal fourth quarter, acquisitions had a positive impact of 40% on sales, a trend that most likely continued in the fiscal first quarter owing to strength in the acquired RPC Group business (July 2019). The buyout has been aiding Berry Global in becoming a leader in the plastic and recycled packaging industry.

Also, Berry Global’s expanded product solutions in incontinence and premium hygiene markets and strong asset base, supported by acquired Clopay Plastic business are likely to have boosted Health, Hygiene & Specialties segment’s revenues in the to-be-reported quarter. The consensus estimate for Health, Hygiene & Specialties’ fiscal first-quarter revenues is pegged at $631 million, indicating a rise of 10.7% from the previous-quarter reported figure.

Moreover, the company’s investments in innovation, technology and operational excellence projects are expected to have been beneficial. In addition, investments made toward footprint optimization might have trimmed costs and expanded Berry Global’s margins.

However, the company has been experiencing softness in its Engineered Materials segment on account of supply chain disruption related to material qualifications, along with weakness in industrial markets. The consensus mark for Engineered Materials revenues is pegged at $621 million, implying a 1.1% decline sequentially. Additionally, continued weakness in North American baby care market and customer product transitions in hygiene might have adversely impacted the company’s top-line performance in the fiscal first quarter.

For fiscal 2020 (ending September 2020), the company anticipates to incur restructuring costs of $90 million related to the RPC buyout. As a matter of fact, rise in expenses (on account of high manufacturing and restructuring related costs) might get reflected in the company’s financials in the to-be-reported quarter as well.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) to increase the odds of an earnings beat. But that is not the case here as we will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Berry Global has an Earnings ESP of -10.64% as the Most Accurate Estimate is pegged at 48 cents, lower than the Zacks Consensus Estimate of 54 cents.

Zacks Rank: Berry Global carries a Zacks Rank #2.

Key Picks

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Alarm.com Holdings, Inc. (NASDAQ:ALRM) carries a Zacks Rank #1 and has an Earnings ESP of +1.15%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tennant Company (NYSE:TNC) has an Earnings ESP of +4.20% and a Zacks Rank #2.

Kadant Inc (NYSE:KAI) carries a Zacks Rank #3 and has an Earnings ESP of +0.59%.

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