BERY - Embedded Expectations Analysis - 2021 04 08
Berry Global Group, Inc. (BERY:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 14.7x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, but management is confident about product innovation, their segment realignment, and their advanced recycling businessSpecifically, management is confident they will continue to drive product innovation, improve their raw material inflation pass-through, and further monetize their advanced recycling business. Furthermore, they are confident there is a solid pipeline and process for approving capital investments and that their segment realignment allowed for more logical combinations of business lines and target industries. Moreover, management is confident modest price benefits were primarily driven by a favorable HHS mix and acquisition-related cost synergies, and that part of their robust cash flows can be returned to shareholder through dividends or share repurchases
Berry Global Group is a supplier of a range of non-woven products used within consumer and industrial end markets. The company's segments are: Consumer Packaging International, which includes recycling, bottles and canisters, containers, polythene films, and technical components product groups; Consumer Packaging North America, which includes containers and pails, foodservice, and tubes product groups; Engineered Materials, which includes stretch and shrink films, converter films, food and consumer films, retail bags, polyvinyl chloride films, and agriculture films product groups; and Health, and Hygiene and Specialties, which includes health products, hygiene products, and specialties products.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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