Will Latin-American Operational Inefficiencies Hurt Bemis?

We issued an updated research report on Bemis Company, Inc. (NYSE:BMS) on Jul 4, 2016. Impact of operational inefficiencies in its Latin-American business remains the major drag on the company’s performance. Foreign currency headwinds, fluctuations in raw material prices and strong competition remain concerns.

Notably, Bemis’ global packaging segment witnessed year over year decline in operating profit in the last three quarters mainly due to Latin American business. The company’s Latin-American rigid business which includes products such as tubs for margarine, yogurt and ice cream, did not perform well operationally during first-quarter 2016.

Customer orders were softer in the quarter due to producers' aggressive pricing actions that were initially resisted by the retailers. This will affect Bemis’ earnings during the second quarter. The company also lowered the upper end of the full-year adjusted earnings per share guidance range to $2.68–$2.78 due to the effect of operational inefficiencies in its Latin-American business as well as the North-American healthcare business.

Bemis remains concerned that foreign currency headwinds would persist through the rest of the year. Given that the company has a significant footprint in Latin America, majority of the headwinds from the Brazil Real will occur in the first two quarters of 2016.

Operationally, Bemis’ U.S. business made great progress on margins during the first quarter -- a good portion of which was driven by the asset recapitalization program. However, the company does not expect future improvements at this exceptionally high pace.

Further, the major markets in which Bemis sells its products are highly competitive. Areas of competition include service, innovation, quality and price. This competition is significant in terms of both size and number of the competing firms. Moreover, fluctuations in raw material prices may hurt the company’s growth.

Bemis currently has a Zacks Rank #4 (Sell).

Stocks to Consider

Some better-ranked stocks in the sector include Apogee Enterprises, Inc. (NASDAQ:APOG) , Berry Plastics Group, Inc. (NYSE:BERY) and General Cable Corp. (NYSE:BGC) . All these three stocks carry a Zacks Rank #2 (Buy).


GENL CABLE CORP (BGC): Free Stock Analysis Report

BEMIS (BMS): Free Stock Analysis Report

APOGEE ENTRPRS (APOG): Free Stock Analysis Report

BERRY PLASTICS (BERY): Free Stock Analysis Report

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