3. Not Berry Smart
What on Earth was Berry Plastics (BERY) thinking -- and drinking -- at its investor day? Based on the stock's reaction, somebody at the disposable cup-maker must have spiked the punch!
Shares of Berry got crushed like a plastic cup at a college kegger Tuesday, falling over 12% to $22 after theflyonthewall.com first reported that the company lowered its fourth-quarter earnings guidance. Apparently Berry's brass told analysts at the gathering that it's EBITDA -- earnings before interest, taxes, depreciation and amortization -- would drop 10% in its fourth quarter ending in September, compared to the previous year.
Look. We understand that Berry had to eventually come clean and inform Wall Street's pencil-pushers that rising raw material costs would force them to slash their guidance. Hey, it happens to everybody at some point.Nevertheless, nobody should drop a stink bomb like that at their own investor day. Talk about a party foul! And even worse was the fact that the company raised expectations last month by telling investors that its operating EBITDA would be slightly higher in its fourth quarter. "Taking into consideration the lower volume forecast and resin headwinds as well as our new cost savings initiatives, we still anticipate a modest increase in our operating EBITDA in the September 2013 quarter versus the prior year," said CEO Jonathan Rich on the company's August 2nd Q3 conference call. Don't worry, Jonathan. You may have thrown one sorry shindig, but at least one person intends to keep drinking your Kool-Aid. Wells Fargo analyst Christopher Manuel shrugged off Berry's shellacking and reaffirmed his outperform rating. "Based on commentary during the presentation, we anticipate an announcement when the company reports its FQ4 2013 results in November regarding a sizeable restructuring effort. BERY did not comment on size or scale, but we believe efforts would be focused on all aspects of the business including headcount reductions, plant rationalizations, and other more permanent/structural measures," wrote Manuel in a research note. Based on Berry's latest debacle, we wouldn't drink to that just yet.
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