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Greif's (GEF) Shares Fall on Trimmed Fiscal 2014 Guidance

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Shares of Greif, Inc. (GEF - Free Report) dipped 4.5% as the leading provider of industrial packaging products and services trimmed its outlook for fiscal 2014. The company now expects earnings to come within the $1.98 and $2.08 per share range, down from the previous expectation of $2.48 to $2.80 per share set forth during its second-quarter conference call. Greif expects higher SG&A expenses and slightly lower-than-expected results from operations for the balance of the fiscal year.

The new guidance of $1.98 to $2.08 reflects a decline in the range of 24% to 28% compared with $2.75 earned in fiscal 2013. In the second quarter of fiscal 2014, Greif reported adjusted earnings of 57 cents per share, down 17.4% from 69 cents per share in the year-ago quarter, due to disrupted production in its flexible products manufacturing facility in Turkey as well as the negative impact of inclement weather on the Paper Packaging and Rigid Industrial Packaging segments.

During the conference call, Greif trimmed Earnings before interest, taxes, depreciation and amortization (EBITDA) guidance in the range of $475 million to $505 million from the previous band of $490 million to $540 million for fiscal 2014. Excluding timberland gains of around $20 million or 20 cents per share, earnings per share was also lowered to the band of $2.48 to $2.80 from $2.60 to $3.15.

After the second quarter, Greif continued to take actions to strengthen its business portfolio, which led to non-cash asset impairment charges of $15.4 million as well as $33 million of non-cash allocations of goodwill for divestitures reducing book gains and generating no tax benefits.

Greif anticipates a gradual global economic recovery during fiscal 2014, which should result in moderate sales and volume improvement along with slightly higher raw material costs. The company expects the Rigid Industrial Packaging segment to benefit from moderate volume growth, especially in Europe.

In addition, Flexible Products segment is repositioned for sustainable growth and profitability during the second half of 2014 depending on the implementation of specific actions regarding the disrupted production in the manufacturing facility in Turkey.

The company is expected to benefit from the sale of select non-core assets. Greif’s plans to accelerate restructuring actions will also drive growth. However, foreign exchange volatility as well as social and political unrest, remain headwinds.

Delaware, OH-based Greif manufactures and sells industrial packaging products, bulk containers, and containerboard and corrugated products worldwide. The company provides services such as blending, filling, packaging and recycling of industrial containers for a wide range of industries. Greif also manages timber properties in North America and offers land management consulting services.

Greif currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Sealed Air Corporation (SEE - Free Report) , Ball Corporation (BLL - Free Report) and Graphic Packaging Holding Co. (GPK - Free Report) . While Sealed Air has a Zacks Rank #1 (Strong Buy), Graphic Packaging and Ball Corporation carry a Zacks Rank #2 (Buy).

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