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SunTrust Rates Bemis Company as a ‘Buy’

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Jul. 15 2016, Updated 10:06 a.m. ET

Price movement

Bemis Company (BMS) has a market cap of $5.0 billion. It rose by 1.3% to close at $52.62 per share on July 13, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.77%, 5.6%, and 19.2%, respectively, on the same day. BMS is trading 3.4% above its 20-day moving average, 5.0% above its 50-day moving average, and 11.1% above its 200-day moving average.

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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 14.7% on July 13.

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

  • Sealed Air (SEE): $9.3 billion
  • Avery Dennison (AVY): $6.5 billion
  • Berry Plastics (BERY): $4.9 billion

Bemis’s rating

SunTrust Robinson Humphrey has initiated the coverage of Bemis Company with a “buy” rating and set the stock price target at $60 per share.

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Performance in 1Q16

Bemis reported 1Q16 net sales of $9.7 billion, a fall of 6.9% from the net sales of $1.0 billion in 1Q15. The sales of US Packaging and Global Packaging fell by 6.6% and 7.7%, respectively, between 1Q15 and 1Q16. It reported restructuring and acquisition-related costs of $0.8 million in 1Q16, compared with $5 million in 1Q15. Its net income and EPS (earnings per share) rose to $56.2 million and $0.59, respectively, in 1Q16, compared with $54.4 million and $0.55, respectively, in 1Q15.

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

Projections

Bemis made the following projections for 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, efficiency, and growth projects

In the next part, we’ll discuss Sealed Air.

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