Bemis: A Stock with Good Momentum

Founded in 1858, Bemis Company Inc. (BMS, Financial) is a major supplier of flexible packaging used by leading food, consumer products, healthcare, and other companies worldwide. The company's business activities are organized around three reportable business segments: U.S. Packaging, Global Packaging (comprises of Latin America, Europe, Asia Pacific, and Healthcare), and Pressure Sensitive Materials (on Nov. 7, 2014, Bemis sold this segment). Over two-thirds of Bemis packaging is used in the food industry, with the balance used in markets including medical, pharmaceutical, chemical and agribusiness.

Bemis has a strong technical base in polymer chemistry, film extrusion, coating and laminating, printing, and converting. The majority of the company's products are sold to customers in the food industry. Headquartered in Neenah, Wisconsin, Bemis has 60 facilities in 11 countries and employs approximately 17,000 individuals worldwide.

BMS recently has been recognised with two Flexible Packaging Association Achievement Awards for its new McCormick Skillet Sauce pouch. This new package earned a gold award in the Packaging Excellence category and a silver award in the Sustainability category.

First Quarter Results

EPS

EPS increased by 17.3% and was $0.61 per share.

GP

GP during the quarter was 20.9% as a percentage of net sales (it was 19.3% as a percentage of net sales in the prior year period).

U.S. Operating Profit

U.S. Packaging segment operating profit return on sales increased to 13.5% (it was 6.8% in the first quarter of 2014).

Net Sales

Net sales increased by 2.5% in the first quarter of 2015 (the impact of currency translation and divestitures are being excluded).

Cashflow

Cash flow from operations for the first quarter increased to $85.2 million (which was $12.5 million in the prior year period).

Share Repurchases

During the first quarter of 2015, Bemis repurchased 0.8 million shares, for a total of $37.5 million. At March 31, 2015, the remaining Board authorization for the repurchase of Bemis common stock was 5.9 million shares.

Return on Invested Capital

Adjusted return on invested capital increased to 9.9% (which was 9.4% in 2014).

Quarterly Dividend

On May7, 2015, BMS declared a regular quarterly cash dividend of 28 cents per share. The dividend is payable June 1, 2015, to shareholders of record at the close of business on May 19, 2015. Bemis has paid an annual dividend on its common stock since 1922 and has been included in Standard & Poor's list of Dividend Aristocrats since 2008.

Segment Wise Results

U.S. Packaging:

U.S. Packaging net sales decreased by 4.2% from the prior year period and were $707.0 million.

Operating profit during the first quarter was 13.5% of net sales and was $95.4 million (which was an increase from prior year period figures- $91.8 million, or 12.4% of net sales).

Global Packaging:

In this segment, the net sales decreased by 6.6% from the prior year quarter and were $333.1 million Strong unit volumes in Europe, Asia, and the healthcare packaging business were offset by unit volume decreases in Latin America due to continuing difficult economic conditions.

Operating profit during the quarter increased from the prior year quarter and was $24.3 million, or 7.3% of net sales (in comparison to $24.1 million, or 6.8% of net sales).

Projections for 2015

The company expects the following:

  1. Adjusted EPS is expected to be in the range of $2.52 -$2.67.
  2. Capex is expected to be in the range of $185 million-$200 million.
  3. Effective income tax rate is expected to be at 34%.

Management Expectations

Management expects revenue to grow from $4.3 billion in 2014 to $5.8 billion in 2019, assuming constant currency. Revenue growth through 2019 is anticipated to be equally balanced between organic and inorganic growth. Operating cash flow is forecasted to be approximately $550 million in 2019.

My Takeaway

Nowadays, people are becoming more and more health conscious and they demand healthy and fresh food containing fewer preservatives. Consumer trends favour flexible packages over metal cans or glass. The health consciousness of people has created the growth of high-barrier packaging industry. BMS is the leader in this industry. In the global packaging segment, Bemis is expanding consumer markets in Latin America and Asia.

Bemis has leading market positions, strong innovation pipeline, global footprint, and finally disciplined capital allocation which includes 31 consecutive years of increasing dividend payments, fund organic growth to enhance revenues and returns, and balanced share repurchases. The company’s main strategic objectives are to accelerate growth, focus on innovation, and continuous improvement.

The first quarter 2015 results are a reflection of the company’s continued progress in the implementation of long-term strategy. It recently has been selected for a 2015 DuPont Award for Packaging Innovation, receiving a Silver Award in the Enhanced User Experience category for the BelGioioso resalable provolone cheese package. The DuPont Awards for Packaging Innovation program is the industry’s longest-running, global, independently judged competition that honours innovation and collaboration throughout the entire packaging value chain. Inaugurated in 1986, the DuPont Packaging Awards program is now recognized as the leading packaging awards program in the world.

The company is exhibiting bullish trend and is a long-term stock. I would recommend this company as a buy.

(Source: Company’s Website)