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From The Survey: Bemis
Bemis Company, Inc. (BMS) can trace its roots back to a St. Louis shop that manufactured cotton bags for grain in the late 1850s. Now headquartered in Wisconsin, the company has come a long way since then. It is a supplier of flexible packaging and pressure sensitive label materials for a variety of global customers. Operations span 78 locations on three different continents and are aimed at generating unique solutions with each offering.
The company’s long lasting success seems to reflect its innovative culture. Bemis, which got its start by replacing old techniques with more efficient technology and machinery, still prioritizes the creation of new-age products. As a result, research and development has become an important business aspect. It is this focus that keeps Bemis at the forefront of the packaging industry. In fact, the company recently received an award that honors the Peel N’ Tear label from the 2012 Beverage World Global Packaging competition. The original design reveals coupons or other bargain offers behind peel-able corners that direct customers to the product’s website, introducing an entirely new profit generating tool.
The Flexible Packaging business, which was responsible for nearly 90% of the company’s revenues in the third quarter of 2012, serves both consumer and industrial end markets with an advanced knowledge of material science. However, an emphasis on food and beverage packaging has typically provided more consistent earnings. Bemis specializes in using multilayer flexible polymer film structures and laminates to protect flavor and freshness as food travels from production sites to store locations. Properly applying technology and scientific expertise can extend shelf life and reduce waste, translating into higher margins for the retailer. Products also include carton sealing tapes and application equipment, blown and cast stretch film cases, injected molded plastic packaging, and bag closing materials.
Despite soft demand, about 65% of total revenue still came from the food industry during fiscal 2011. Products for cheese and other dairy products have seen unit increases of late, and it is likely that other market areas will follow suit before the end of 2013. Bemis has also done well to tailor existing products into those that better utilize market research. For example, products that maintain a fresh appearance, as pressuring quality, were developed after discovering how influential the color of meat is during a consumer’s selection process.
The same resources are used for health instruments, personal-care products, and other items that benefit from modified atmosphere packaging. Safeguarding a sterile environment is essential when dealing with pharmaceutical items. Even so, providing easy access is of equal importance considering the fragile nature of many medical devices.
The Pressure Sensitive Material segment accounts for a much smaller part of sales. Adhesive technologies that can withstand a wide variety of climates and weather conditions are used to make graphics, labels, and technical products.
Competition, Risk, & Performance
Earnings have been held back by high food prices and slowing demand lately. More than two thirds of all goods are sold in developed nations, so revenue growth has slowed with sluggish growth in Latin America and Asia. Weak foreign exchange rates against the U.S. dollar have also impaired profits. However, Bemis and like-minded companies, such as Sealed Air Corporation (SEE) and Sonoco Products Company (SON), are looking forward to an improved economic backdrop in 2013.
Bemis continues to lead the flexible packaging market and has done well to implement measures that offset difficult business environments. For one, the company is narrowing its focus and spending more on both material and market research. Additionally, management has closed down a number of facilities over the past six months. Consolidation efforts should last through the first half of 2013 and could ultimately provide $100 million in savings over the next three years.
Bemis’ outlook is currently much brighter than it has been in the recent past. Its deep-rooted presence in the food and drink industry, combined with a slowly improving economic setting, should yield favorable results over the long term. In fact, the company’s claim that its products can be found in “virtually every aisle of the supermarket” is probably not far from the truth. Moreover, many investors should find the stock’s stability and dividend history appealing.
For those interested in learning more about Bemis’ prospects, along with the particular investment merits of the stock, subscribers are encouraged to review our full report in The Value Line Investment Survey.