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Bull of the Day: Graphic Packaging Holding Company (GPK)

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Graphic Packaging Holding Company (GPK - Free Report) stock offers investors a wonderful combination of superb value, stable growth, dividends, and a market-topping performance over the past 15 years and the last 12 months. And GPK stock still trades for under $25 per share.

Graphic Packaging is a sustainable paper and fiber-based packaging firm that topped our quarterly estimates once again in early February and raised its outlook as it proves how indispensable its offerings are during any economic environment.

An Attractive Package

Graphic Packaging is about as far from flashy as it gets. Still, its portfolio of paper packaging products are essential cogs in the economy, serving clients in industries ranging from food, beverages, and foodservice to personal care, household products, pets, and beyond. GPK’s paper-based packaging solutions include folding cartons, cooking solutions, containers, cups, and much more.

The Atlanta, Georgia-headquartered firm works with tons of recognizable brands. Graphic Packaging also holds leading market positions in coated recycled paperboard, coated unbleached kraft paperboard, and solid bleached sulfate paperboard.

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The company expanded its reach and scope when it completed its acquisition of AR Packaging in November of 2021. The deal helped GPK broaden its geographical reach because AR is one of Europe’s leading packaging companies.

Graphic Packaging is now a consumer packaging giant in both the U.S. and Europe. It is worth stressing just how crucial GPK’s offerings are in the economy and how unlikely they are to go out of style no matter what the economy looks like 10 years from now. And GPK is aiming to “extend its position as the lowest-cost, highest-quality paperboard producer in North America” with a new mill and more. 

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Growth and Outlook

Graphic Packaging has grown its revenue at a rather solid clip over the years, with a few hiccups along the way. Graphic Packaging’s revenue climbed 7% in 2020 and 9% in 2021. It then posted 32% revenue growth in 2022 and 78% adjusted earnings expansion. Much of the huge YoY climb was due to its AR acquisition, still, its organic sales popped 3%.

Graphic Packaging topped our quarterly EPS estimate for the sixth quarter in a row and it also upped its guidance even as the overall S&P 500 earnings outlook fades. This is part of a steady upward revisions trend. GPK’s upbeat earnings revisions—with FY23 up 9% and FY24 up 5%—help it capture a Zacks Rank #1 (Strong Buy) right now.

Zacks estimates call for GPK’s revenue to climb another 5% in 2023 and 2% in 2024. Meanwhile, its adjusted earnings are projected to pop 18% in 2023 and 4% in FY24. Both Graphic Packaging’s top and bottom-line outlooks are solid considering the difficult to compete against years of growth it is coming up against.

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Other Fundamentals

Wall Street is high on the stock with 10 of the 13 brokerage recommendations Zacks has at “Strong Buys.” Graphic Packaging also pays a dividend that’s yielding 1.7% at the moment to match its highly-ranked industry.

The stock lands “A” grades for Growth and Value in our Style Scores system. Graphic Packaging is expanding its production efforts to support growing demand, with its investment of approximately $1 billion over three years to be “internally funded with operating cash flow.”

Graphic Packaging shares have outclimbed the S&P 500 over the last 10 years, up 215% vs. 160%. Stretching back 15 years, GPK has climbed 650% vs. the benchmark’s 205% and its industry’s 89%.

More recently, GPK has surged 45% in the past two years vs. its industry’s 7% and the market’s 1% gain. The stock has popped 5% YTD and it trades near its recent records at around $23 per share. Plus, Graphic Packaging’s average Zacks price target offers 22% upside to its current level. 

Despite the performance, GPK trades right at neutral RSI levels and it just recently bounce back well above its 50-day moving average. On top of its cheap under $25 price, GPK is trading almost right at its own decade-long lows (8.3X) at 8.4X forward 12-month earnings. This represents a 60% discount to its own highs and 45% against its median.

Graphic Packaging also trades at a 50% discount to the Zacks Industrial Products sector and the S&P 500.

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Bottom Line

Graphic Packaging operates a boring, essential business poised for long-term steady expansion. Investors must also consider just how impressive its valuation is since GPK stock has soared over the last 15 years. Overall, GPK appears to be a great stock for the current market and economic uncertainty and for years to come.

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