Berry Global Group, Inc. (NYSE:BERY) Q3 2024 Results Conference Call August 2, 2024 10:00 AM ET Company Participants Dustin Stilwell - Investor Relations Kevin Kwilinski - Chief Executive Officer Mark Miles - Chief Financial Officer Conference Call Participants Sahas Apte - UBS Philip Ng - Jefferies George Staphos - Bank of America Securities Mike Roxland - Truth Securities Ghansham Panjabi - Baird Arun Viswanathan - RBC Capital Markets Adam Samuelson - Goldman Sachs Matt Roberts - Raymond James Christopher ...

Financial Data and Key Metrics Changes - The company achieved 2% organic volume growth and reported adjusted EPS growth of 16% year-over-year, amounting to $2.18 per share [6][14] - Operating EBITDA increased by 6% to $546 million compared to the previous year [14][26] - The company expects to generate over $1 billion in free cash flow in fiscal Q4 and anticipates cash proceeds exceeding $2 billion from strategic divestitures within the next year [9][21] Business Line Data and Key Metrics Changes - Consumer Packaging International division saw a revenue decline of 5% due to polymer cost pass-through, but organic volume growth of 1% was noted [15] - Consumer Packaging North America division's revenue increased by 3%, driven by 2% organic volume growth across various markets [17] - The Flexibles division experienced a 2% revenue decline, offset by a 2% organic volume increase [19] - Health, Hygiene and Specialties division's revenue remained flat, with a 2% organic volume increase [20] Market Data and Key Metrics Changes - The company noted a weaker demand environment driven by inflation, but saw improvements in promotional activity from customers [8][34] - In Europe, the company reported a growth rate increase from 5% to 7%, driven by differentiated products and regulatory changes [80] Company Strategy and Development Direction - The company is focused on optimizing its portfolio, applying lean transformation, and enhancing commercial excellence to drive growth [28] - A strategic goal is to increase consumer products focus from over 70% to over 80% of volume through divestitures [9][22] - The company aims to achieve a year-end leverage of 3.5x or lower by the end of fiscal 2024 [8][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook, citing steady sequential improvement and customer focus on growth over price [8] - The company anticipates low single-digit volume growth in Q4, with potential upside if market conditions improve [39][86] - Management acknowledged the impact of inflation on consumer demand but noted a positive trend in promotional activities [34][117] Other Important Information - The company has reduced net debt by over $3 billion since mid-2019 and returned more than $1.5 billion to shareholders through share repurchases and dividends [23] - The company is in various stages of discussions regarding potential divestitures, which are expected to enhance its focus on higher growth areas [118] Q&A Session Summary Question: Interest expense guidance for Q4 - Management indicated that the increase in interest expense is primarily due to non-cash interest income that fell off in Q3 [31] Question: Market share trends in takeout cups - Management noted that foot traffic has been weaker due to inflation, but promotional activity is increasing, leading to optimism for volume growth [34][35] Question: Update on divestitures and capital deployment - Management confirmed a commitment to achieving a leverage target of 3.5 or lower and indicated that share buybacks are a priority due to undervalued stock [44] Question: Pilot program at Franklin and innovation pipeline - Management reported a 20% improvement in throughput at the Franklin facility and highlighted strong momentum in the innovation pipeline [51][55] Question: EBITDA guidance and cash flow generation - Management clarified that EBITDA guidance remains within the previously discussed range, with resin inflation being a significant factor [62][64] Question: Competitive activity and market dynamics - Management acknowledged increased competition but emphasized their ability to maintain margins and win market share without sacrificing profitability [75][76] Question: Volume growth outlook for fiscal Q4 and 2025 - Management expects similar low single-digit growth in Q4 and anticipates accelerating growth in 2025 based on performance in key markets [86][88]

For the quarter ended June 2024, Berry Global (BERY) reported revenue of $3.16 billion, down 2.1% over the same period last year. EPS came in at $2.18, compared to $1.90 in the year-ago quarter. The reported revenue compares to the Zacks Consensus Estimate of $3.21 billion, representing a surprise of -1.44%. The company delivered an EPS surprise of +7.39%, with the consensus EPS estimate being $2.03. While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how ...

Core Insights - Berry Global reported quarterly earnings of $2.18 per share, exceeding the Zacks Consensus Estimate of $2.03 per share, and up from $1.90 per share a year ago, representing an earnings surprise of 7.39% [1] - The company posted revenues of $3.16 billion for the quarter ended June 2024, which fell short of the Zacks Consensus Estimate by 1.44% and decreased from $3.23 billion year-over-year [2] - Berry Global has surpassed consensus EPS estimates three times over the last four quarters but has not beaten revenue estimates during the same period [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $2.25 on revenues of $3.15 billion, while for the current fiscal year, the estimate is $7.44 on revenues of $12.28 billion [7] - The trend of estimate revisions for Berry Global is currently favorable, leading to a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Containers - Paper and Packaging industry, to which Berry Global belongs, is currently ranked in the top 17% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8] - Another competitor in the same industry, Amcor, is expected to report quarterly earnings of $0.21 per share, reflecting a year-over-year increase of 10.5%, with revenues projected at $3.66 billion, down 0.3% from the previous year [9]

Core Viewpoint - Both Berry Global (BERY) and Amcor (AMCR) are currently rated as 2 (Buy) by Zacks, indicating a positive earnings outlook due to favorable analyst estimate revisions [1][2] Valuation Metrics - BERY has a P/B ratio of 2.29, while AMCR has a P/B ratio of 3.76, suggesting BERY is the superior value option based on these metrics [4][5] - The forward P/E ratio for BERY is 8.74, compared to AMCR's 14.08, indicating BERY may be undervalued relative to AMCR [8] - BERY has a PEG ratio of 1.31, while AMCR's PEG ratio is significantly higher at 4.60, further supporting BERY's position as a better value stock [8][9] Investment Considerations - Both companies are considered strong candidates in the Containers - Paper and Packaging sector for investors seeking undervalued stocks [6] - The Value category highlights BERY's strong performance with a Value grade of A, while AMCR has a Value grade of C, indicating a significant difference in perceived value [9]

Core Insights - The article emphasizes the importance of value investing and highlights specific companies that are currently undervalued in the market Company Analysis - Berry Global Group (BERY) has a Zacks Rank of 2 (Buy) and an A for Value, with a current P/E ratio of 8.06 compared to the industry average of 14.57 [7] - Greif (GEF) is also rated 2 (Buy) with a Value Score of A, and its Forward P/E has ranged from 10.67 to 19.12, with a median of 13.05 [8][9] - BERY's Forward P/E has fluctuated between 6.80 and 8.88, with a median of 7.69 over the past year [7] Valuation Metrics - BERY has a P/S ratio of 0.61, significantly lower than the industry average of 1.01, indicating potential undervaluation [3] - Greif's Forward P/E ratio is 13.13, which is favorable compared to the industry average of 14.57, and its PEG ratio is 1.31 compared to the industry average of 4.51 [4] - Greif's P/B ratio stands at 1.50, while the industry's price-to-book ratio is 9.14, suggesting that GEF is undervalued [5] Investment Outlook - Both Berry Global Group and Greif are identified as strong value stocks based on their earnings outlook and current valuation metrics, making them attractive options for value investors [10]

Core Insights - Berry Global (BERY) is anticipated to report a year-over-year increase in earnings despite a decrease in revenues for the quarter ending June 2024, with a consensus EPS estimate of $2.03, reflecting a +6.8% change [1][3][4] - The company's revenues are projected to be $3.21 billion, down 0.7% from the previous year [4] - Analysts have revised the consensus EPS estimate 0.09% higher in the last 30 days, indicating a positive reassessment of the company's earnings prospects [4][6] Earnings Surprise Prediction - Berry Global has a positive Earnings ESP of +0.99%, suggesting a likelihood of beating the consensus EPS estimate [6][7] - The company holds a Zacks Rank of 3, which indicates a neutral outlook [15] - Historical performance shows that Berry Global has beaten consensus EPS estimates in two out of the last four quarters, with a recent surprise of +2.63% [16][19] Industry Context - In comparison, Sonoco (SON), another player in the packaging industry, is expected to report a year-over-year decline in earnings and revenues, with a Zacks Rank of 5, indicating a strong sell [21][22] - The consensus EPS estimate for Sonoco has been revised 1% lower over the last 30 days, resulting in an Earnings ESP of 0.00% [24]

Company Overview - Glatfelter is a leading global supplier of engineered materials, focusing on innovation and sustainability, with a 2023 revenue of $1.4 billion and approximately 2,980 employees worldwide [1] - Berry Global Group, Inc. creates innovative packaging solutions, leveraging global capabilities and sustainability leadership, with over 40,000 employees across more than 250 locations [2] Merger Announcement - The proposed merger between Berry's Health, Hygiene and Specialties Global Nonwovens and Films business and Glatfelter has led to the creation of a new brand, Magnera, which aims to be a global leader in the specialty materials industry [14][8] - The merger is expected to close in the second half of 2024, pending approval from Glatfelter shareholders and customary closing conditions [13] Strategic Focus - Magnera will focus on innovation, operational excellence, and strategic market penetration, offering a broad product range in high-growth markets for polymer and fiber-based applications [9][10] - The combined company will provide a comprehensive suite of products and solutions, enhancing customer choice and flexibility [10][12] Product Offerings - Magnera will serve thousands of customers worldwide, offering products for absorbent hygiene, protective apparel, wipes, specialty building and construction, and food and beverage industries [11]

Core Insights - Berry Global Group, Inc. has partnered with La Rosée to create a refillable deodorant stick called Exclusive Refill, emphasizing sustainability and natural ingredients [1][5][11] Company Collaboration - The development of the La Rosée deodorant took two years, focusing on a formula that is 99% natural and free from aluminium salts and alcohol [5][10] - The packaging solution is designed to be sustainable, waterproof, user-friendly, and aesthetically pleasing, avoiding over-wrapping [5] Product Features - The Exclusive Refill features a reusable deodorant stick and a specially designed refill that is 62% lighter than a full stick, weighing significantly less due to its mono-material polypropylene (PP) design [11] - The deodorant has a 50ml size for convenient and hygienic application, allowing consumers to refill in under a minute [11] Environmental Initiatives - Berry Global is transitioning the Exclusive Refill to use CleanStream recycled PP, addressing the demand for eco-friendly packaging in the personal care sector [14] - The collaboration aligns with the growing trend towards sustainable practices in the cosmetics industry [14] Financial Performance - Berry Global currently holds a Zacks Rank of 3 (Hold) and has seen its stock decline by 13.7% year-to-date, contrasting with the industry's growth of 0.8% [12] - The company is implementing cost-reduction strategies, including plant closures and labor management, to improve margin performance [15] Market Challenges - The Consumer Packaging International unit is facing challenges due to reduced selling prices linked to lower resin prices, while the Flexibles unit is impacted by softness in North American transportation and shrink film markets [16]

Berry Global Group, Inc. (BERY) recently announced that it has achieved an important regulatory milestone regarding the proposed tax-free spin-off and merger of the majority of its Health, Hygiene and Specialties segment with Glatfelter Corporation (GLT) . The majority of Berry Global's Health, Hygiene and Specialties segment comprises the Global Nonwovens and Films business ("HHNF"), which will be merged with Glatfelter to form a new entity known as NewCo. Based in Charlotte, NC, Glatfelter is engaged in m ...