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Berry Global (BERY) Q4 Earnings Beat Estimates, Down Y/Y

Berry Global Group, Inc. BERY reported impressive fourth-quarter fiscal 2021 (ended Oct 2, 2021) results. Its earnings surpassed estimates by 23.53%. This was the company’s ninth consecutive quarter of better-than-expected results. Also, the quarter’s sales beat estimates by 4.44%.

The company’s adjusted earnings of $1.89 per share surpassed the Zacks Consensus Estimate of $1.53. However, the bottom line decreased 4.1% from the year-ago number of $1.97 as sales growth was offset by high costs and expenses.

In fiscal 2021, the company’s adjusted earnings were $7.21 per share, topping the Zacks Consensus Estimate of $5.78. Also, the bottom line expanded 13% from the previous fiscal year’s $6.38.

Revenue Details

In the quarter under review, Berry Global’s net sales were $3,669 million, reflecting year-over-year growth of 22%. The improvement was driven by $716 million contributions from higher selling prices. These were partially offset by an organic sales decline of 1% due to labor and supply-chain woes, and an adverse $60 million impact from divestitures. Movements in foreign currencies had a positive impact of $42 million.

Also, the top line surpassed the Zacks Consensus Estimate of $3,513 million.

The company reports results under four segments — Consumer Packaging–International, Consumer Packaging–North America, Health, Hygiene & Specialties, and Engineered Materials. A brief snapshot of fiscal fourth-quarter segmental sales is provided below:

Consumer Packaging–International’s sales were $1,099 million, up 11.6% from the year-ago quarter. The results benefited from effective pricing actions that boosted sales by $109 million. It accounted for 30% of the quarter’s net sales.

Consumer Packaging–North America’s sales were $887 million, increasing 30.7% year over year. Effective pricing actions increased sales by $219 million while modest declines in organic sales played spoilsport. It accounted for 24% of the quarter’s net sales.

Revenues generated from Health, Hygiene & Specialties amounted to $809 million, up 20.6% year over year. Effective pricing actions contributed $161 million to sales while organic sales decline of 3% and adverse impacts of divestitures were worrisome. It accounted for 22% of the quarter’s net sales.

Revenues from Engineered Materials grew 29.9% year over year to $883 million. Increased pricing boosted sales by $226 million and divestitures lowered sales by $39 million. It accounted for 24% of the quarter’s net sales.

In fiscal 2021, the company’s revenues were $13.85 billion, increasing 18.3% year over year. The top line surpassed the Zacks Consensus Estimate of $13.71 billion.

Margin Profile

In the fiscal fourth quarter, Berry Global’s cost of goods sold increased 31.4% to $3,078 million. It represented 83.9% of net sales compared with 77.9% in the year-ago quarter. Selling, general and administrative expenses decreased 9.1% to $199 million and represented 5.4% of net sales.

Operating earnings before interest, tax, depreciation and amortization (EBITDA) was $530 million, down 9.6% year over year. EBITDA margin was at 14.5% compared with 19.5% in the year-ago quarter.

Adjusted operating income in the quarter decreased 16.6% year over year to $321 million. Adjusted operating margin came in at 8.8%, down 400 basis points. Interest expenses were $79 million, down 17.7% year over year. Labor issues, supply-chain woes, and cost inflation played spoilsport in the quarter.

Balance Sheet & Cash Flow

Exiting fourth-quarter fiscal 2021, Berry Global’s cash and cash equivalents were $1,091 million, up 35.7% from $804 million in the previous quarter. Current and long-term debt decreased 2.4% to $9,460 million from the previous quarter.

In fiscal 2021, the company repaid $3,496 million of borrowings. Its proceeds from borrowings totaled $2,716 million.

In fiscal 2021, it generated net cash of $1,580 million from operating activities, up 3.3% from the previous year. Capital expenditure totaled $676 million, increasing 16% from $583 million spent in fiscal 2020. Free cash flow in the year was $904 million.

Outlook

Berry Global is focused on creating organic growth opportunities and improving the balance sheet. Demand across businesses, e-commerce, health, food safety and wellness, is expected to be strong in the quarters ahead. For fiscal 2022 (ending September 2022), it expects organic sales to be 2% year over year. Adjusted earnings per share are predicted to be $7.20-$7.70 and the effective tax rate will likely be 25%

Operating EBITDA is expected to be $2.25–$2.35 billion. Free cash flow will likely be $900-$1,000 million for fiscal 2022. Cash flow from operations is expected to be $1,700-$1,800 million and capital expenditure to be $800 million.

Berry Global Group, Inc. Price, Consensus and EPS Surprise

Berry Global Group, Inc. price-consensus-eps-surprise-chart | Berry Global Group, Inc. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $9.5 billion, Berry global currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Industrial Products sector are discussed below.

A. O. Smith Corporation AOS presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Its earnings surprise in the last reported quarter was 22.39% and that in the last four quarters was 16.82%, on average.

In the past 30 days, A. O. Smith’s earnings estimates have increased 6.6% for 2021 and 9% for 2022. Its shares gained 15.8% in the past three months.

Emerson Electric Co. EMR reported better-than-expected results in the last reported quarter, with earnings surpassing estimates by 1.68%. Its earnings surprise in the last four quarters was 10.69%, on average. The company presently carries a Zacks Rank #2.

Emerson’s earnings estimates increased 5.5% for fiscal 2022 (ending September 2022) and 5.8% for fiscal 2023 (ending September 2023) in the past 30 days. Its shares decreased 7.1% in the past three months.

Applied Industrial Technologies, Inc.’s AIT results in the last reported quarter were impressive, with earnings surpassing estimates by 14.29%. Its last four-quarter average earnings surprise was 26.71%.

Applied Industrial’s earnings estimates have increased 1.9% for fiscal 2022 (ending June 2022) and 2.2% for fiscal 2023 (ending June 2023) in the past month. Its shares have gained 21.7% in the past three months.


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