What happened

Shares of plastic packaging maker Berry Global (NYSE:BERY) were down 11.3% as of 12:30 p.m. EDT on Thursday after the company reported disappointing earnings. Although Wall Street estimates were for earnings of $0.98 per share on sales of $2.06 billion, Berry instead reported Q2 2019 earnings of just $0.84 on sales of $1.95 billion.

So what

It gets worse. The $0.84 that Berry earned was only a pro forma profits number. Actual GAAP earnings were only $0.55 per share, down 17% year over year on a decline in sales of only 1%.

Sales declined 3% in the company's health and hygiene unit, 4% in engineered materials, and rose only in the consumer packaging unit -- by 6%.

Red arrow crashing into floor

Image source: Getty Images.

Now what

It wasn't all bad news for Berry, though. Cash from operations increased 29% year over year to $170 million, bringing free cash flow (FCF) for the year's first half to $164 million -- up 62% from last year's first half. Moreover, management reaffirmed its guidance for positive full-year FCF of $670 million. Assuming it hits that target, Berry will be valued at just over 10 times FCF by year end, not an unreasonable valuation for a stock expected to grow earnings at 10% a year over the next five years.