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Why Berry Global Group Shares Popped 13.9% Today

By Travis Hoium - Nov 21, 2019 at 2:14PM

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A big acquisition is helping results for Berry Global.

What happened

Shares of packaging solutions company Berry Global Group ( BERY 1.27% ) jumped as much as 13.9% in trading Thursday after management reported fiscal fourth-quarter 2019 results and confirmed guidance for fiscal 2020. At 1:20 p.m. EST, shares were still up 11.3% on the day and holding steady.

So what

Revenue was up 47% in the quarter to $3.02 billion, partly due to the acquisition of RPC Group, and net income jumped 72% to $229 million, or $1.70 per share. On an adjusted basis, earnings were $0.90 per share, easily topping the $0.74 estimate from Wall Street analysts.

Plastic packaging products.

Image source: Getty Images.

Management also reaffirmed the fiscal 2020 guidance of $1.4 billion in cash flow from operations and $800 million in free cash flow. That's a strong level of cash generation for a company worth $6.2 billion even after today's pop, especially when you consider the $500 million in cash interest costs that are expected for next year.

Now what

Beating expectations can often send a stock higher, and that's what's happening with Berry Global Group today. But management didn't raise guidance, and that should temper investors' expectations for 2020. Results can swing in strange ways around big acquisitions, so I want to see how much of the increase in profit is sustainable over the next year before jumping into the stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Berry Global Group, Inc. Stock Quote
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