logo
  Join        Login             Stock Quote

Berry Plastics (BERY) Initiated at 'Buy' by Deutsche Bank on Compelling Valuation

 November 13, 2012 01:56 PM


(By Balaseshan) Deutsche Bank analyst Mark Wilde initiated coverage of Berry Plastics Group Inc. (NYSE: BERY) with a "buy" rating and $17 price target based on compelling valuation.

Berry Plastics is a leading producer of consumer-oriented plastic packaging. With sales of about $4.7 billion a year, Berry is largely U.S.-oriented and sells a mix of rigid & flexible packaging, Wilde noted. Berry enjoys #1 or #2 market positions in most of its businesses.

Looking ahead, thanks to a promising new product pipeline and cost savings and synergies from recent acquisitions, Berry has the potential to deliver above-trend growth and focus on deleveraging, the analyst noted.

Berry has grown sales and EBITDA at a 20 percent-plus CAGR since 2000. Much of Berry's growth has historically been driven by acquisitions – a skill the firm has honed over time, the analyst noted.

While acquisitions will remain an essential element of strategy, Wilde expects the focus to pivot toward organic growth opportunities and balance-sheet deleveraging. Among the organic initiatives are the new Versalite hot cup based upon a proprietary expanded-polypropylene technology.

Post-IPO net debt/EBITDA is about 4.9 times. Along with improving EBITDA margins and stability of performance, the analyst thinks investors will be closely monitoring Berry's ability to reduce leverage over time.

By year-end Dec 2014, Wilde thinks Berry will be able to reduce its leverage to just under 4.0 times. That ratio could improve further if Berry is to expand EBITDA beyond our current targets.

On an EV/EBITDA basis, the stock currently trades at 6.6 times the analyst's calendar 2013 EBITDA estimate of $850 million. His $17 price target equates to 7.0 times this estimate, which he views as conservative.

Wilde said his targeted multiple is 1 times below where the peer group currently trades. As the deleveraging thesis is "borne out" in results, he thinks there is potential for that valuation discount to shrink. He noted that 1 times equates to about $7.

BERY is trading up 1.98 percent at $14.15 on Tuesday.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageNetflix, Inc. (NASDAQ:NFLX) Q1 Earnings Preview: Trending Towards a Double Surprise

Netflix, Inc. (NASDAQ:NFLX) will post its first-quarter 2014 financial results and business outlook on its read on...

article imageSolarCity Corp (SCTY): Baird Says Buy the Dip

SolarCity Corp (NASDAQ:SCTY) is a darker shade of green than most today. The alternative energy company I read on...

article imageSelect Comfort Corp. (SCSS) Q1 Earnings Preview: Bear Vs. Bullish Surprise Rests on Margins

Select Comfort Corp. (NASDAQ:SCSS) will release results for the first quarter ended Mar. 29, 2014, after read on...

article imageAdvanced Micro Devices, Inc. (AMD) Q1 Earnings Preview: April Fools’ Gold

Advanced Micro Devices, Inc. (NYSE:AMD) will webcast its quarterly earnings conference call on Thursday, read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center

Related Articles:

Recent Articles by Balaseshan
More Articles on: Finance , Industrial Products



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.