BERY

Berry Global Group Inc

Industrial/Transportation


Presented:03/28/2017
Price:$48.02
Cap:$6.14B
Current Price:$69.98
Cap:$8.02B

Presented

Date03/28/2017
Price$48.02
Market Cap$6.14B
Ent Value$11.65B
P/E Ratio21.44x
Book Value$1.99
Div Yield0%
Shares O/S127.80M
Ave Daily Vol1,133,084
Short Int1.99%

Current

Price$69.98
Market Cap$8.02B
Berry Global Group Inc engages in the manufacture and marketing of value-added plastic consumer packaging and engineered materials. It operates through the following segments: Rigid Packaging, Engineered Materials, and Flexible Packaging. The Rigid Packaging segment comprises of both Rigid Open Top and Rigid Closed Top, which includes containers, foodservice items, closures, over caps, bottles, prescription containers, and tubes. The Engineered Materials segment consists of pipeline corrosion protection solutions, tapes and adhesives, PE-based film products and can liners. The Flexible Packaging segment consists of high barrier, multilayer film products as well as finished flexible packages such as printed pouches. The company was founded on November 18, 2005 and is headquartered in Evansville, IN.

Publicly traded companies mentioned herein: Bemis Company Inc (BMS), Berry Plastics Group Inc (BERY), Sealed Air Corp (SEE)

Highlights

Berry Plastics (BERY) generates substantial free cash flow (FCF) and appears to be in a position to benefit from flat feedstock prices (polyethylene, polypropylene, etc.). The presenter is long at $48, and sees a favorable risk/ reward setup for investors. From a pricing perspective, BERY should not see a headwind with the market in contango. The company should be able to “get more out of a market environment because it is always catching up; customers pushing back as time goes on means pricing is still working in their favor”. And, the ability to use FCF to delever is an important aspect of the thesis. BERY completed the acquisition of AEP in early 2017 and guided to $550mm of FCF this year. As the company grows and synergies are realized, FCF could step-up to $720mm in 2018. If his model is accurate, BERY’s 9% FCF yield would jump to 12% (versus peers trading in the 5-6.5% FCF yield range, with 5.7% being the average). If BERY’s FCF yield normalized to the higher-end of the peer group’s range the stock would appreciate by 33%.

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Idea Discussion

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