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Why Is Greif (GEF) Down 4.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Greif (GEF - Free Report) . Shares have lost about 4.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Greif due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Greif Earnings and Revenues Beat Estimates in Q2, Up Y/Y

Greif reported second-quarter fiscal 2021 adjusted earnings per share of $1.13, which surpassed the Zacks Consensus Estimate of $1.11. It also exceeded the company’s guidance of 96 cents to $1.06. Further, the bottom line improved 18.9% year on year. Strong business performance and solid customer demand drove the company’s bottom-line results.

Including one-time items, earnings per share was $2.51 in the quarter compared with 19 cents in the prior-year quarter.

Operational Update

Sales were up 15.8% year over year to $1,341 million. The top line beat the Zacks Consensus Estimate of $1,210 million.

Cost of sales was up 17.1% year over year to $1,075 million. Gross profit amounted to $266 million, reflecting growth of 10.4% from the prior-year quarter. Gross margin came in at 19.8% compared with the year-ago quarter’s 20.8%.

Selling, general and administrative (SG&A) expenses was up 21.5% year over year to $147 million. Operating profit soared 179.2% year over year to $201 million. Operating margin was 15% in the reported quarter compared with 6.2% in the year-earlier period. Adjusted EBITDA declined 2.2% year over year to $177 million in the fiscal second quarter.

Segmental Performance

Sales in the Global Industrial Packaging segment increased 19.1% year over year to $798 million. The segment’s adjusted EBITDA amounted to $106.2 million compared with the year-ago quarter’s $99.1 million

The Paper Packaging segment sales rose 11.4%, year over year to $537 million in the fiscal second quarter. The segment’s adjusted EBITDA slumped to $68.3 million from prior-year quarter’s $79.1 million.

The Land Management segment’s sales totaled $5.6 million in the reported quarter compared with $6.7 million in the year-ago quarter. Adjusted EBITDA was $2.1 million, down from year earlier quarter’s $3.1 million.

Financials

Greif reported cash and cash equivalents of $110.4 million as of fiscal second quarter 2021-end, compared with $105.9 million as of end of fiscal 2020. Cash flow from operating activities totalled $152.3 million in the quarter under review compared with $99.8 million in the prior-year quarter.

Long-term debt amounted to $2,155 million as of Apr 30, 2021 compared with $2,336 million as of Oct 31, 2020.

On Jun 8, Greif’s board announced a quarterly cash dividend of 44 cents per share of Class A Common Stock and 66 cents per share of Class B Common Stock. The dividend payout will be made on Jul 1, to shareholders of record at the close of business on Jun 21, 2021.

Outlook

Given improved customers’ demand patterns, Greif expects fiscal 2021 adjusted earnings per share between $4.55 and $4.85. Adjusted free cash flow is anticipated in between $285 million and $325 million.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 41.15% due to these changes.

VGM Scores

Currently, Greif has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Greif has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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