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Stock Strategist

We See Plenty of Upside in Bemis

New management is taking the company in the right direction, and Amcor has made a generous offer.

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 Bemis (BMS) specializes in the production of flexible resin products used in consumer goods packaging. Around 70% of sales are in the United States, with the remainder concentrated in Latin America, Europe, and Southeast Asia. Bemis’ international mix should grow larger thanks to the recent acquisitions of Steripack and Emplal and higher sustainable volume growth rates in emerging markets.

After an extended period of underinvestment, a 2014 change in management focused on putting the business back on track. A divestiture of the low-margin pressure-sensitive label business and a renewed focus on high-barrier flexible packaging have improved operating margins. Bemis’ profitability primarily revolves around the specialized production of meat, cheese, and dairy films. While consumption growth in these categories is likely to remain slow in developed economies, a steeper growth runway remains as emerging-market diets include a growing portion of these items.

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Charles Gross does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.