Sonoco or Berry Global: Which is the Better Buy Rated Stock?

Packaging demand has remained remarkably consistent in the past decade and consequently the industry has outperformed the S&P 500. Customer convenience remains the top priority for the companies in the global packaging market and thus they remain constantly focused on bringing in new packaging designs or redesigning their existing packaging as per customer preferences.

The packaging companies are focused on expanding geographic reach and realigning product offerings to reduce operational costs. They are targeting on high growth segments to strengthen financial position in the market.

Berry Global Group's adjusted earnings per share for second-quarter fiscal 2017 (ended Apr 1, 2017) improved 36% year over year to 79 cents per share. Earnings beat the Zacks Consensus Estimate of 67 cents. The company also posted record net sales for any quarter in its history of $1.806 billion. Acquisition and organic sales volume increases, cost saving initiatives and productivity improvements in operations offset by negative product mix and price/cost spread, led to the overall improvement in earnings.

Earnings Surprise History

Taking a look at both the companies surprise history, Sonoco has outpaced the Zacks Consensus Estimate in three of the four trailing quarters, with an average positive earnings surprise history of 3.79%. Meanwhile, Berry Global Group has delivered positive earnings surprises in the trailing four quarters, generating an average positive earnings surprise of 22.36%.

Earnings Estimate Revisions, Growth

On one hand, earnings estimates for Berry Global Group have gone up 5% for fiscal 2017 and 3% for fiscal 2018 in the past 60 days. On the other hand, estimates have been stable for Sonoco.

Sonoco's fiscal 2017 earnings estimates reflects a year–over-year growth of 2% while the  fiscal 2018 earnings estimate reflects a year-over-year growth of 7.93%. Berry Global Group's earnings estimates for fiscal 2017 and fiscal 2018 depict a projected growth of 13.44% and 14.68%, respectively. Berry Global Group has an expected earnings per share growth rate of 19.17%, much higher than Sonoco's 5.25%. Berry Global Group is a clear winner here.

Conclusion

Our comparative analysis shows that Sonoco holds an edge over Berry Global Group when considering profitability, valuation ratios, inventory turnover and leverage. However, when considering price performance, average positive earnings surprise and earnings growth projections, Berry Global is clearly a better stock. Since there is little to choose between the two, both these Zacks Rank #2 stocks would make great additions to your portfolio.

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