Greif (GEF) down 2% since last earnings report: can it bounce back?

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A months have passed since Greif’s last earnings report (GEF). Stocks lost around 2% during this time, outperforming the S&P 500.

Will the recent negative trend continue until its next results release, or is Greif likely to experience a breakout? Before we dive into how investors and analysts have reacted in recent times, let’s take a quick look at his latest earnings report to better understand the important factors.

Best Estimates of Greif’s Third Quarter Revenue and Sales, 21 Hikes View

Greif reported adjusted earnings per share of $ 1.93 for the third quarter of fiscal 2021, beating Zacks’ consensus estimate of $ 1.60. Net income improved 127% year-on-year. Strong end-market demand boosted the company’s bottom line despite material cost inflation and labor shortages.

Including non-recurring items, earnings per share were $ 1.89 in the quarter, up from 35 cents in the prior year quarter.

Operational update

Sales jumped 38% year-on-year to $ 1,491 million. The top line beat Zacks’ consensus estimate of $ 1,432 million.

Cost of sales increased 36% year over year to $ 1,172 million. Gross profit amounted to $ 319 million, reflecting 45.1% growth from the prior year quarter. The gross margin was 21.3% compared to 20.2% in the quarter of the previous year.

Selling, general and administrative (SG&A) expenses increased 18.4% year-over-year to $ 143 million. Operating profit climbed 179.6% year-over-year to $ 173 million. The operating margin was 11.6% in the quarter presented, compared to 5.7% in the period of the previous year. Adjusted EBITDA increased 49.2% year over year to $ 237.8 million in the third quarter of the year.

Segment performances

Global Industrial Packaging segment sales increased 47% year-over-year to $ 908 million. Segment Adjusted EBITDA was $ 146.2 million compared to $ 84.5 million in the prior year quarter.

Sales of the Paper Packaging segment increased 26% year-over-year to $ 579 million in the third fiscal quarter. Segment Adjusted EBITDA increased to $ 89.9 million from $ 72 million in the prior year quarter.

Land Management segment sales totaled $ 4.2 million in the current quarter, compared to $ 5.9 million in the prior year quarter. Adjusted EBITDA was $ 1.7 million, down from $ 2.9 million in the previous year quarter.

Finance

Greif reported cash and cash equivalents of $ 99.8 million at the end of the third quarter of fiscal 2021, compared to $ 105.9 million at the end of fiscal 2020. Related cash flows operating activities totaled $ 95 million in the quarter under review, compared to $ 135 million in the previous year quarter.

Long-term debt stood at $ 2,089.7 million as of June 31, 2021, compared to $ 2,335.5 million as of October 31, 2020.

On August 31, Greif’s board of directors announced a quarterly cash dividend of 46 cents per share of class A common stock and 69 cents per share of class B common stock. Dividend payment will be made October 1 to shareholders of record at the close of business on September 17, 2021.

Outlook

Given strong end market demand, Greif now expects FY2021 adjusted earnings per share of between $ 5.10 and $ 5.30, up from previous guidance of $ 4.55 and $ 4.85. Adjusted free cash flow is expected to be in the range of $ 335 million to $ 365 million, up from previous forecast of $ 285 million to $ 325 million.

How have the estimates evolved since then?

It turns out that revised estimates have trended upward over the past month. The consensus estimate has changed by 33.75% due to these changes.

VGM scores

Right now, Greif has a Growth score below D, a score with the same score on the momentum front. However, the stock was given a rating of B on the value side, placing it in the second quintile for this investment strategy.

Overall, the stock has an overall VGM score of C. If you’re not strategy-focused, this score is the one you should be interested in.

Outlook

Estimates are on the rise for the stock, and the magnitude of this revision looks promising. It’s no surprise that Greif has a Zacks Rank 1 (strong buy). We expect an above-average return on the security over the next few months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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