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Berry Global Group, Inc. BERY is well-poised for growth in the coming quarters, courtesy of its businesses and investments in the latest equipment technologies. The company's efforts to reward its shareholders handsomely add to its appeal.

Based in Evansville, IN, Berry Global manufactures and distributes nonwoven specialty materials, engineered materials and consumer packaging products in the market. The company services personal care, healthcare, beverage and food markets in South America, North America, Asia and Europe.

Berry Global currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 10.6% compared with the industry’s 24% growth.

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Let’s discuss the factors that should influence investors to retain this company for the time being.

Business Strength: Berry Global is gaining from the solid momentum in its Consumer Packaging North America segment, supported by an increase in consumer discretionary spending in the United States. Higher discretionary spending is reflected in the growth in demand for the segment’s products. The segment has been particularly witnessing strength in its food, beverage, personal care, home care and industrial end markets, which has led to 4% growth in its revenues in the third quarter of fiscal 2024 on a year-over-year basis.

Investments in The Latest Technologies: Berry Global’s investments in the latest equipment technologies, advantaged film development and design for circularity are likely to enhance its competency in the long run. Also, it boasts a strong portfolio of products, the bulk of which includes consumer non-discretionary products like bottles and vials, containers, tubs and pots and filtration materials.

In April 2023, the company completed the construction of a second manufacturing facility and Global Healthcare Center in Sira, Bangalore. The Sira facility extends Berry Global’s research and development expertise and increases production in several major healthcare sectors. The facility enables the company to increase the supply of patient-centered healthcare solutions (like ophthalmic, nasal pumps and injectable administrations) in India and throughout South Asia, thereby capitalizing on the growing opportunities across the healthcare markets in the region.

Balanced Capital Allocation Strategy: Berry Global employs a balanced capital allocation strategy, using its cash flow for business acquisitions, dividend payments and share repurchases. In June 2023, the company acquired Pro-Western Plastics, enhancing its container business in North America, especially within the dairy, industrial and medical sectors. The acquired business operates under the Consumer Packaging North America segment.

For shareholder rewards, Berry Global repurchased 2 million shares for about $117 million in the first nine months of fiscal 2024 and paid out $104 million in dividends during the same period. Additionally, it repurchased shares totaling $600 million in fiscal 2023. In November 2023, the company raised its dividend by 10% to 27.5 cents per share, resulting in an annual total of $1.10.

Downsides of BERY

Segmental Weakness: Berry Global is experiencing challenges across most of its segments, particularly in its Consumer Packaging International division, which saw a 7% revenue decline year over year in the fiscal third quarter due to weak food service demand and lower selling prices from resin price reductions. The Flexibles segment also faced a 2% drop in revenues, impacted by softness in the North American transportation and shrink film markets. Additionally, the Health, Hygiene & Specialties segment reported a 2% revenue decline. Overall, Berry Global’s revenues fell 2% year over year in the fiscal third quarter, due to low demand, customer destocking and ongoing inflationary pressures.

Rising Long-Term Debt: Berry Global’s long-term debt in the five fiscal years (2018-2022) witnessed a 9.7% CAGR. Despite its efforts to reduce debt leverage, its current and long-term debt remained high at $8.7 billion at the end of the fiscal third quarter. Such high debt levels raise concerns for the company.

Stocks to Consider

Some better-ranked companies are discussed below.

Packaging Corporation of America PKG currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PKG delivered a trailing four-quarter average earnings surprise of 8.6%. In the past 60 days, the Zacks Consensus Estimate for Packaging Corporation’s 2024 earnings has increased 1.3%.

AptarGroup, Inc. ATR presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 7.2%.

In the past 60 days, the Zacks Consensus Estimate for ATR’s 2024 earnings has remained steady.

Parker-Hannifin Corporation PH currently carries a Zacks Rank of 2. PH delivered a trailing four-quarter average earnings surprise of 2.6%.

In the past 60 days, the consensus estimate for Parker-Hannifin’s fiscal 2025 earnings has increased 1.3%.

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