UPDATE: Barclays Downgrades Bemis Company Following Valuation Not Supported By Growth Trajectory
In a report published Wednesday, Barclays analyst Scott Gaffner downgraded Bemis Company (NYSE: BMS) to Underweight from Equal-weight, dropping its price target to $36.00, following valuation not supported by growth trajectory.
According to the report, Above-average valuation combined with below-average earnings growth trajectory lead analysts to downgrade BMS to UW from EW: BMS trades at a 2x premium to the packaging industry and roughly one turn higher than its historical average despite below-average prospects for EPS growth.
“EPS grew only 6% from 2010 to 2013 versus packaging peer growth of 26%, and we forecast an EPS CAGR of 8% for BMS from 2014 to 2016, versus a 13% increase for the industry,” the report noted. “Limited earnings growth is supported by our belief that BMS will post below-average organic growth combined with the prospect of limited margin gains going forward. We reduce our 2014 EPS estimate to $2.40, and PT to $36 representing 10% downside from current levels.”
BMS closed Tuesday at $38.86 with shares trading down at 2.73 percent.
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