On Friday, BofA Securities adjusted its outlook on Berry Global Group (NYSE:BERY), a manufacturer of plastic packaging products, by increasing its price target to $81.00 from the previous $74.00. The firm maintained its Buy rating on the stock. The revision comes in the wake of the company's performance and strategic moves that are anticipated to enhance shareholder value.
The new price target reflects Berry Global's potential for growth through a combination of valuation, cost optimization efforts, and strategic portfolio adjustments. According to BofA Securities, these factors are driving the positive view on the stock. In the second half of the fiscal year, Berry Global is expected to see a performance that is 20% higher than in the first quarter, at the midpoint of guidance.
The company has started the June quarter with at least a low-single-digit increase in year-over-year volumes, which is projected to add $30 million to the sequential Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). Additionally, a standard seasonal increase in EBITDA of $80 million, along with improved price-cost dynamics, is contributing to the favorable outlook for the second half of the fiscal year.
Management's confidence in divestitures that could yield an incremental $1 billion over the next two years is also a factor in the analyst's positive assessment. Despite the market's lukewarm response to this guidance, as evidenced by a 3% decline in Berry Global's shares on the reporting day, BofA Securities believes that at 7.8 times the calendar year 2024 estimated earnings, the stock's current valuation more than compensates investors for the associated risks.
InvestingPro Insights
Berry Global Group's (NYSE:BERY) recent strategic initiatives have not gone unnoticed, with management's aggressive share buybacks highlighting a commitment to enhancing shareholder value. This aligns with BofA Securities' optimistic outlook and recent price target increase. The InvestingPro data further supports the positive sentiment, showing a P/E Ratio of 12.51 and an adjusted P/E Ratio for the last twelve months as of Q1 2024 at 10.62, suggesting that the stock could be undervalued relative to its earnings.
Moreover, the company's high shareholder yield and strong free cash flow yield are crucial metrics that investors should consider. With a dividend yield of 1.84% and a recent dividend growth of 10.0%, Berry Global demonstrates its ability to consistently return value to its shareholders. Additionally, the stock's low price volatility could make it an attractive option for investors seeking stability in their portfolios.
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