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Growth & Income

Although rising commodity prices have squeezed margins a bit, Greif, Inc. (GEF - Snapshot Report) has still been relatively successful in raising its prices.

The company recently reported solid fourth quarter results in which earnings per share beat the Zacks Consensus Estimate by 5%. Sales were up 31% year-over-year due in part to higher selling prices.

Based on current Zacks Consensus Estimates, earnings per share are expected to grow 13% in 2011 and 12% in 2012. In addition to that growth, the company also pays a dividend that yields 2.6%. It is a Zacks #2 Rank (Buy) stock.

Company Description

Greif is an industrial packaging products and services company. It produces steel, plastic, fibre, flexible and corrugated containers, containerboard and packaging accessories, and provides blending, filling and packaging services for a wide range of industries.

The company was founded all the way back in 1877 and is headquartered in Delaware, Ohio. It has a market cap of $3.1 billion.

Fourth Quarter Results

Fourth quarter earnings per share came in at $1.51, beating the Zacks Consensus Estimate by 7 cents. It was a 9% increase over the same quarter in 2009.

Net sales were up 31% year-over-year due in part to a better global economy. Excluding acquisitions, sales volume was up 5%. Higher selling prices accounted for 11% growth.

The overall gross margin contracted, however, from 22.2% of sales to 20.8% due to higher raw material costs.

Outlook

In the fourth quarter press release, the company stated that it expects to earn between $4.75 and $5.00 per share in 2011. The Zacks Consensus Estimate is within guidance at $4.92. This represents 13% growth over 2010 EPS.

The 2012 consensus estimate is currently $5.50, equating to 12% EPS growth.

Dividend

Since 2000, Greif has raised its dividend 6 times at a compound annual growth rate of 20.2%.

GEF: Greif, Inc.

It currently yields 2.6%.

Valuation

Shares trade at 13.2x forward earnings, a slight discount to the industry average of 13.7x. Its price to book ratio of 2.3 is also below the peer group at 2.6.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

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