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Greif's (GEF) Q4 Earnings Surpass Estimates, Sales Miss

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Greif, Inc. (GEF - Free Report) reported adjusted earnings per share of 78 cents for fourth-quarter fiscal 2020 (ended Oct 31, 2020), which surpassed the Zacks Consensus Estimate of 72 cents. However, the bottom line slumped 37% year on year. Results were impacted by lower volumes in the Rigid Industrial Packaging & Services and Flexible Products & Services segments. Also, lower sales in the Paper Packaging & Services segment due to reduced published containerboard and boxboard prices, and the divestiture of Consumer Packaging Group business had an impact on results.

Including one-time items, earnings per share declined to 74 cents per share from the year-ago quarter’s $1.09 per share.

Operational Update

Sales were down 6% year over year to $1,161 million. The top line also lagged the Zacks Consensus Estimate of $1,165 million.

Greif, Inc. Price, Consensus and EPS Surprise

Cost of sales was down 4.5% year over year to $930 million. Gross profit amounted to $231.7 million, reflecting a decline of  10.5% from the prior-year quarter. Gross margin came in at 20% compared with the year-ago quarter’s 21%.

Selling, general and administrative (SG&A) expenses rose 7% year over year to $139 million. Operating profit slumped 21% year over year to $91.8 million. Operating margin was 7.9% in the reported quarter compared with 9.4% in the year-earlier period. Adjusted EBITDA declined 17% year over year to $154.5 million in the fiscal fourth quarter.

Segmental Performance

Sales in the Rigid Industrial Packaging & Services declined 6% year over year to $579 million due to reduced volumes and lower average sale prices. The segment’s adjusted EBITDA decreased 6% year over year to $65 million.

The Paper Packaging segment sales fell 6%, year over year to $502 million in the fiscal fourth quarter due to lower published containerboard and boxboard prices, and the divestment of the Consumer Packaging Business. However, the segment witnessed higher volumes but it was not enough to offset the impact of these headwinds. The segment’s adjusted EBITDA dropped to $77.4 million from prior-year quarter’s $108.7 million.

Sales in the Flexible Products & Services segment increased 3% year over year to $73 million as higher average sale prices offset lower volumes. The segment reported adjusted EBITDA of $8.8 million compared with $5.8 million in the prior-year quarter.

The Land Management segment’s sales totaled $6.7 million compared with $7.1 million in the year-ago quarter. Adjusted EBITDA came in at $3 million, flat year over year.

Financials

Greif reported cash and cash equivalents of $105.9 million as of fiscal 2020-end, compared with $77.3 million as of end of fiscal 2019. Cash flow from operating activities came in at around $455 million in fiscal 2020 compared with $390 million in the prior fiscal. Adjusted free cash flow increased to $346 million in fiscal 2020 from $268 million in fiscal 2019.

Long-term debt amounted to $2,335 million as of Oct 31, 2020 compared with $2,659 million as of Oct 31, 2019. The company had $538.1 million of available borrowing capacity within its $800.0 million revolving credit facility. During fiscal 2020, Greif had paid $104.3 million in dividends to stockholders.

On Dec 8, Greif’s board announced a quarterly cash dividend of 44 cents per share of Class A Common Stock and 656 cents per share of Class B Common Stock. The dividend payout will be made on Jan 1, 2021, to shareholders of record at the close of business on Dec 18, 2020.

Fiscal 2020 Performance

The company’s adjusted earnings per share declined 19% year over year to $3.22 in fiscal 2020, surpassing the Zacks Consensus Estimate of $3.16. Notably, earnings came in higher than the company’s guidance of $3.00-$3.20. Sales dipped 2% year over year to $4,515 million, which lagged the Zacks Consensus Estimate of $4,520 million.

Including one-time items, fiscal 2020 earnings per share was $1.83 compared with $2.89 in fiscal 2019.

Outlook

Greif expects first-quarter fiscal 2021 adjusted earnings per share to range between 48 cents and 58 cents. The mid-point of the guided range suggests a decline of 17% from the adjusted earnings per share of 64 cents in first-quarter fiscal 2020.

Price Performance

Over the past three months, Greif’s shares have appreciated 44.4%, outperforming the industry’s growth of 14.5%.

Zacks Rank & Key Picks

Greif currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include AGCO Corporation (AGCO - Free Report) , Avery Dennison Corporation (AVY - Free Report) and Ball Corporation . While AGCO flaunts a Zacks Rank #1 (Strong Buy), Avery Dennison and Ball Corporation carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today's Zacks #1 Rank stocks here.

AGCO has an estimated earnings growth rate of 15.5% for the ongoing year. Shares of the company have appreciated 19% in the past three months.

Avery Dennison has a projected earnings growth rate of 4.6% for the current year. Over the past three months, the company’s shares have gained 28.5%.

Ball Corporation has an expected earnings growth rate of 16.2% for 2020. The stock has rallied 14% over the past three months.

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