Tuesday, Baird adjusted its stance on Berry Global Group (NYSE:BERY), moving from an Outperform rating to a Neutral position. The firm also revised its price target for the company's shares, reducing it to $65 from the previous $68. This change reflects concerns over a new wave of inflation, primarily influenced by rising crude oil prices, which are expected to impact the company's financial performance.
The analyst from Baird noted that the anticipated second inflation surge is a key factor in the decision to downgrade Berry Global's stock. The escalation in crude oil prices is believed to be a driving force behind this inflationary pressure. As a result, the firm has tempered its investment outlook for Berry Global, which is a leading provider of plastic packaging and engineered materials.
In addition to inflation concerns, the analyst pointed out that the recent spin-off of the company's Health, Hygiene & Specialties division, now known as HHS, has added complexity to Berry Global's investment profile. The spin-off has been identified as a complicating element, detracting from the clarity of the investment thesis that previously centered on improving consumer packaged goods (CPG) end-market volumes.
The new price target of $65 is grounded on an estimated 8 times multiple of the firm's forecasted fiscal year 2025 earnings per share (EPS) of $8.40. This revised price target suggests a more cautious view of the company's future earnings potential, taking into account the predicted challenging economic conditions.
Berry Global Group, headquartered in Evansville, Indiana, is recognized for its range of products that serve various industries, including food and beverage, healthcare, and personal care. The company's performance is closely tied to the costs of raw materials, such as crude oil, which is integral to the production of plastics.
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