Bemis (BMS) Misses on Q1 Earnings & Revenues; Shares Dip

Shares of Bemis Company, Inc. BMS lost roughly 0.02% on Friday, a day after the company reported its first-quarter 2016 results. Its adjusted earnings per share dropped 1.6% year over year to 60 cents per share. The net impact of currency translation reduced earnings per share in the reported quarter by approximately 3 cents, as compared to the first quarter of 2015. Earnings also lagged the Zacks Consensus Estimate of 62 cents.

Including acquisition-related costs of 1 cent per share each, earnings came in at 59 cents per share compared with 58 cents in the prior-year quarter. The year-ago quarter included restructuring charges of 3 cents.

Operational Update

Net sales declined 7% year over year to $967.9 million, also falling short of the Zacks Consensus Estimate of $985.2 million.

Cost of products sold decreased 7.7% year over year to $759 million in the quarter. Gross profit declined 4% to $208.8 million from $217.5 million in the year-ago quarter. Gross margin expanded 70 basis points (bps) to 21.6% in the quarter.

Selling, general and administrative expenses decreased to $99.4 million from $106.4 million in the year-ago quarter. Adjusted operating income dropped 2% year over year to $100 million. Adjusted operating margin increased 60 bps to 10.4% in the quarter.

Segment Performance

Net sales at the U.S. Packaging segment declined 6.6% year over year to $660.5 million. The decrease in net sales was due to the contractual pass-through of lower raw material costs as well as the mix of products sold. Segment operating profit increased to $101.7 million from $95.4 million in the prior-year quarter.

Net sales at the Global Packaging segment went down 7.7% year over year to $307.4 million. Currency translation reduced net sales by 20.3%, primarily due to currencies in Latin America. The Dec 2015 Emplal acquisition drove net sales by 4%. Excluding the impact of currency translation and the acquisition, net sales increased by 8.6%. Adjusted segment operating profit plunged 44% to $16.3 million from $29.3 million in the year-ago quarter.

Financial Update

Bemis had cash and cash equivalents of $50.1 million at the end of first-quarter 2016 compared with $59.2 million at 2015 end. The company recorded cash flow from operations of $52.6 million in the reported quarter compared with $85.2 million in the prior-year period. Total debt increased to $1.44 billion as of Mar 31, 2016, from $1.38 billion as of Dec 31, 2015. As of Mar 31, 2016, total company net debt to adjusted EBITDA was 2.4 times.

During the first quarter, Bemis repurchased 1 million shares for $44.3 million. As of Mar 31, 2016, approximately 22.4 million shares were available for repurchase. Adjusted return on invested capital ROIC increased to 10.5% as of Mar 31, 2016, from 9.9% as of Mar 31, 2015. On Feb 4, 2016, Bemis increased the authorization for share repurchases by 20 million additional shares, supplementing the previous remaining authorization.

On Apr 20, 2016, Bemis announced its agreement to acquire the medical device packaging operations and related value-added services of SteriPack Group.

Guidance

Bemis expects full-year adjusted diluted earnings per share to be in the range of $2.68–$2.78, compared to $2.68–$2.83 expected earlier. It lowered the upper end of the full-year EPS guidance range due to the impact of operational inefficiencies on the company's Latin American business and the North American healthcare business.

The company reaffirmed its outlook for cash from operations in the range of $450–$500 million. It also retained its 2016 capital expenditures guidance of approximately $200 million to support productivity and efficiency projects as well as growth projects, driven by increased customer demand for value-added products.

Bemis' Global Packaging business was dampened by operational challenges in the Latin American business as well as the inefficient ramp-up of newly hired workforce at its expanded healthcare packaging facility in Wisconsin. The company is working to rectify these issues and expects that operating performance should be stabilized by the third quarter.

Neenah, WI-based Bemis Company is a global manufacturer of flexible packaging products and pressure sensitive materials sold primarily to the food industry. The company also sells its products to other customers in the chemical, agri-business, medical, pharmaceutical, personal care, electronics, automotive, construction and graphic industries.

Zacks Rank

Currently, Bemis has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industrial products sector include Graphic Packaging Holding Company GPK, Packaging Corporation of America PKG and Sonoco Products Co. SON. All these stocks carry a Zacks Rank #2 (Buy).

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