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Why Goldman Sachs Rated Bemis Company as ‘Neutral’

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Price movement of Bemis Company

Bemis Company (BMS) has a market cap of $4.8 billion and rose by 1.2% to close at $50.21 per share on May 12, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 1.7%, -2.9%, and 13.0%, respectively, as of the same day. This means that BMS is trading 1.8% below its 20-day moving average, 2.4% below its 50-day moving average, and 9.2% above its 200-day moving average.

Why Goldman Sachs Rated Bemis Company as 'Neutral'

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Related ETF and peers

The Vanguard Materials ETF (VAW) invests 0.59% of its holdings in Bemis. The ETF tracks a very broad market-cap-weighted index of US materials companies. The YTD price movement of VAW was 8.6% as of May 12, 2016.

The market caps of Bemis’s competitors are as follows:

  • Sealed Air (SEE)—$9.4 billion
  • Avery Dennison (AVY)—$6.8 billion
  • Berry Plastics Group (BERY)—$4.6 billion

Performance in fiscal 1Q16

Goldman Sachs initiated the coverage for Bemis Company with a “neutral” rating and set the price target at $53 per share.

Bemis reported fiscal 1Q16 net sales of $9.7 billion—a fall of 6.9% compared to net sales of $1.04 billion in fiscal 1Q15. The sales of US Packaging and Global Packaging fell by 6.6% and 7.7%, respectively, in fiscal 1Q16, as compared to fiscal 1Q15. It reported restructuring and acquisition-related costs of $0.8 million in fiscal 1Q16, as compared to $5 million in fiscal 1Q15.

Its net income and EPS (earnings per share) rose to $56.2 million and $0.59, respectively, in fiscal 1Q16, as compared to $54.4 million and $0.55, respectively, in fiscal 1Q15.

Bemis’s cash and cash equivalents fell by 15.4%, and its inventories rose by 3.7% in fiscal 1Q16, as compared to fiscal 4Q15. Its current ratio and debt-to-equity ratio rose to 2.1x and 1.9x, respectively, in fiscal 1Q16, as compared to 1.9x and ~1.9x, respectively, in fiscal 4Q15.

Quarterly dividend and projections

Bemis Company declared a regular quarterly cash dividend of $0.29 per share on its common stock. The dividend will be paid on June 1, 2016, to shareholders of record at the close of business on May 17, 2016.

Bemis made the following projections for fiscal 2016:

  • adjusted EPS of $2.68–$2.78, which was lowered due to operational inefficiencies in the company’s Latin American business and in the North American healthcare business
  • cash from operations of $450 million–$500 million
  • capital expenditure of ~$200 million to support productivity and efficiency projects and growth projects

In the next part, we’ll discuss the performance of Vista Outdoor in fiscal 4Q16.

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