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Reasons Why You Should Avoid Betting on Greif (GEF) Stock Now
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Greif (GEF - Free Report) has failed to impress investors as it has been witnessing a decline in adjusted earnings over the past five quarters. This mainly reflects the downtrend in volumes, which is bearing the brunt of a demand decline, as customer spending remains muted amid inflationary pressures and high-interest rates. GEF’s results have also been negatively impacted by higher input costs.
The Zacks Rank #5 (Strong Sell) company has a market capitalization of $3 billion.
Price Performance
The company’s shares have lost 3.2% over the past year compared with the industry’s 0.2% decline.
Image Source: Zacks Investment Research
Let’s discuss the factors that are taking a toll on the company.
Greif’s net sales in the fourth quarter of fiscal 2023 totaled $1.3 billion. Sales were down 12.5% from the year-ago quarter. Adjusted earnings per share were $1.56, which marked a 15% decline year over year. This follows a 25.5% plunge in earnings in the third quarter of fiscal 2023. The company’s earnings growth rate has been negative since the fourth quarter of fiscal 2022.
In the Global Industrial Packaging segment, volume growth has been in the negative territory for the eighth quarter in a row. This reflects the overall contraction in the industrial sector. Demand in North America has weakened owing to muted domestic spending amid inflationary pressures and higher interest rates. The Global Industrial Packaging segment’s results have also been impacted by the divestiture of Flexible Products & Services business in the second quarter of 2022.
In the Paper Packaging and Services segment, demand remains soft across most key end markets, with continued weakness in textiles and paper cores, partially offset by strength in non-residential construction. Volumes have declined for the past six consecutive quarters.
This downtrend in volumes and lower selling prices have been weighing on the company’s top-line performance. GEF anticipates volumes in the Global Industrial Packaging segment to be flat in fiscal 2024. The Paper Packaging and Services segment’s volumes are expected to witness a minor improvement driven primarily by improving demand in containerboard.
Also, expecting the continuation of the ongoing price and cost trends for both businesses in fiscal 2024, Greif expects adjusted EBITDA to be around $585 million. This suggests a 29% plunge from the adjusted EBITDA of $819 million in fiscal 2023. Adjusted free cash flow is projected at around $200 million compared with $481 million reported in fiscal 2023.
Reflecting these headwinds, the Zacks Consensus Estimate for the company’s 2023 earnings has been revised 30% downward in the past 30 days. The consensus mark of earnings of $4.10 per share suggests a year-over-year decline of 33%.
Despite the odds, Crown Holdings’ focus on cost-rationalization measures, improving operational execution and capital discipline will help it sail through this uncertainty. Greif continues to make strategic acquisitions to expand its geographic reach and its product portfolio, which will aid growth.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Crane Company (CR - Free Report) , Applied Industrial Technologies (AIT - Free Report) and A. O. Smith Corporation (AOS - Free Report) .
The Zacks Consensus Estimate for Crane Company’s 2023 earnings per share is pegged at $4.18. The consensus estimate for 2023 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 29.8%. CR shares have rallied 40% in a year.
Applied Industrial has an average trailing four-quarter earnings surprise of 15%. The Zacks Consensus Estimate for AIT’s 2023 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have moved up 4% in the past 60 days. The company’s shares have gained 40% in a year.
The Zacks Consensus Estimate for A. O. Smith’s 2023 earnings is pegged at $3.77 per share. The consensus estimate for 2023 earnings has moved 5% north in the past 60 days and suggests year-over-year growth of 20.1%. The company has a trailing four-quarter average earnings surprise of 14%. AOS’ shares have gained 41% in the past year.
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Reasons Why You Should Avoid Betting on Greif (GEF) Stock Now
Greif (GEF - Free Report) has failed to impress investors as it has been witnessing a decline in adjusted earnings over the past five quarters. This mainly reflects the downtrend in volumes, which is bearing the brunt of a demand decline, as customer spending remains muted amid inflationary pressures and high-interest rates. GEF’s results have also been negatively impacted by higher input costs.
The Zacks Rank #5 (Strong Sell) company has a market capitalization of $3 billion.
Price Performance
The company’s shares have lost 3.2% over the past year compared with the industry’s 0.2% decline.
Image Source: Zacks Investment Research
Let’s discuss the factors that are taking a toll on the company.
Greif’s net sales in the fourth quarter of fiscal 2023 totaled $1.3 billion. Sales were down 12.5% from the year-ago quarter. Adjusted earnings per share were $1.56, which marked a 15% decline year over year. This follows a 25.5% plunge in earnings in the third quarter of fiscal 2023. The company’s earnings growth rate has been negative since the fourth quarter of fiscal 2022.
In the Global Industrial Packaging segment, volume growth has been in the negative territory for the eighth quarter in a row. This reflects the overall contraction in the industrial sector. Demand in North America has weakened owing to muted domestic spending amid inflationary pressures and higher interest rates. The Global Industrial Packaging segment’s results have also been impacted by the divestiture of Flexible Products & Services business in the second quarter of 2022.
In the Paper Packaging and Services segment, demand remains soft across most key end markets, with continued weakness in textiles and paper cores, partially offset by strength in non-residential construction. Volumes have declined for the past six consecutive quarters.
This downtrend in volumes and lower selling prices have been weighing on the company’s top-line performance. GEF anticipates volumes in the Global Industrial Packaging segment to be flat in fiscal 2024. The Paper Packaging and Services segment’s volumes are expected to witness a minor improvement driven primarily by improving demand in containerboard.
Also, expecting the continuation of the ongoing price and cost trends for both businesses in fiscal 2024, Greif expects adjusted EBITDA to be around $585 million. This suggests a 29% plunge from the adjusted EBITDA of $819 million in fiscal 2023. Adjusted free cash flow is projected at around $200 million compared with $481 million reported in fiscal 2023.
Reflecting these headwinds, the Zacks Consensus Estimate for the company’s 2023 earnings has been revised 30% downward in the past 30 days. The consensus mark of earnings of $4.10 per share suggests a year-over-year decline of 33%.
Despite the odds, Crown Holdings’ focus on cost-rationalization measures, improving operational execution and capital discipline will help it sail through this uncertainty. Greif continues to make strategic acquisitions to expand its geographic reach and its product portfolio, which will aid growth.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Crane Company (CR - Free Report) , Applied Industrial Technologies (AIT - Free Report) and A. O. Smith Corporation (AOS - Free Report) .
CR currently sports a Zacks Rank #1 (Strong Buy), and AIT and AOS each carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Crane Company’s 2023 earnings per share is pegged at $4.18. The consensus estimate for 2023 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 29.8%. CR shares have rallied 40% in a year.
Applied Industrial has an average trailing four-quarter earnings surprise of 15%. The Zacks Consensus Estimate for AIT’s 2023 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have moved up 4% in the past 60 days. The company’s shares have gained 40% in a year.
The Zacks Consensus Estimate for A. O. Smith’s 2023 earnings is pegged at $3.77 per share. The consensus estimate for 2023 earnings has moved 5% north in the past 60 days and suggests year-over-year growth of 20.1%. The company has a trailing four-quarter average earnings surprise of 14%. AOS’ shares have gained 41% in the past year.