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Here's Why Greif (GEF) Stock is an Attractive Pick Right Now
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Greif, Inc. (GEF - Free Report) is gaining from the solid demand in the key end markets, expected benefits from the Caraustar acquisition and its cost-reduction actions. Focus on operational execution, restructuring actions and capital discipline will also drive growth. These factors make Greif a compelling investment option.
The company currently sports a Zacks Rank #1 (Strong Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price Performance: The stock has gained 33.9% so far this year, outperforming the industry’s growth of 7.2%.
Image Source: Zacks Investment Research
Earnings & Sales Top Estimates in Q3: Greif’s third-quarter fiscal 2021 adjusted earnings per share of $1.93 beat the Zacks Consensus Estimate of $1.60 and surged 127% year over year. Revenues of $1,491 million also topped the Zacks Consensus Estimate of $1,432 million and improved 38% year on year.
Positive Outlook: Greif expects fiscal 2021 adjusted earnings per share between $5.10 and $5.30. The mid-point of the guidance indicates a year-over-year improvement of 68%.
Earnings Surprise History: The company has a trailing four-quarter average earnings surprise of 11.4%.
Upbeat Estimate Revision Activity: The Zacks Consensus Estimate for the company’s fiscal 2021 earnings has moved 11.2% north over the past 60 days.
Positive Growth Projections: The Zacks Consensus Estimate for the fiscal 2021 earnings per share is currently pegged at $5.27, indicating year-over-year growth of 63.6%. The stock has an estimated long-term earnings growth rate of 10%.
Valuation is Inexpensive: The trailing 12-month EV/EBITDA ratio is 7.5 for the company, while the industry's average trailing 12-month EV/EBITDA ratio is 20.3.
Other Driving Factors
Greif is witnessing broad-based improvement in several of its key end markets. The company’s Global Industrial Packaging segment has been recording solid volume growth for chemicals, specialty chemicals and lubricants. It witnessed impressive growth in the global rigid Intermediate Bulk Container (IBC) and large plastic drum during the fiscal third quarter. The segment will continue to benefit from these factors in the fiscal fourth quarter as well.
The Paper Packaging & Services segment has been gaining from strong volumes in converting operations and higher selling prices owing to increases in the published containerboard and boxboard prices. The improved demand for textiles and protective packaging has been driving tube and core volumes. This momentum is likely to continue in the fiscal fourth quarter.
In February 2019, the company acquired Caraustar Industries, Inc. and is currently integrating its operations. The buyout has strengthened Greif’s leadership in industrial packaging, and significantly bolstered its margins, free cash flow and profitability. It continues to anticipate run rate synergies of at least $70 million by 2022.
Greif will benefit from its focus on operational execution, capital discipline, and a solid and diverse product portfolio. The company will continue to focus on its restructuring activities, which include optimizing and integrating operations in the Paper Packaging & Services segment, rationalizing operations, and closing underperforming assets in the Global Industrial Packaging segment. Moreover, it has been implementing price increases in response to the robust demand, and combating cost inflation, which is likely to aid earnings. Efforts to lower the debt level also bode well.
Other Stocks to Consider
Other top-ranked stocks in the Industrial Products sector include Encore Wire Corporation (WIRE - Free Report) , Deere & Company (DE - Free Report) and Lincoln Electric Holdings, Inc. (LECO - Free Report) . While Encore Wire and Deere sport a Zacks Rank #1, Deere carries a Zacks Rank #2, at present.
Encore Wire has a projected earnings growth rate of 332.6% for fiscal 2021. So far this year, the company’s shares have gained 45%.
Deere has an estimated earnings growth rate of 117.5% for fiscal 2021. The company’s shares have rallied 36.3%, so far this year.
Lincoln Electric has an expected earnings growth rate of 45.1% for 2021. The stock has appreciated 22%, year to date.
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Here's Why Greif (GEF) Stock is an Attractive Pick Right Now
Greif, Inc. (GEF - Free Report) is gaining from the solid demand in the key end markets, expected benefits from the Caraustar acquisition and its cost-reduction actions. Focus on operational execution, restructuring actions and capital discipline will also drive growth. These factors make Greif a compelling investment option.
The company currently sports a Zacks Rank #1 (Strong Buy) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price Performance: The stock has gained 33.9% so far this year, outperforming the industry’s growth of 7.2%.
Image Source: Zacks Investment Research
Earnings & Sales Top Estimates in Q3: Greif’s third-quarter fiscal 2021 adjusted earnings per share of $1.93 beat the Zacks Consensus Estimate of $1.60 and surged 127% year over year. Revenues of $1,491 million also topped the Zacks Consensus Estimate of $1,432 million and improved 38% year on year.
Positive Outlook: Greif expects fiscal 2021 adjusted earnings per share between $5.10 and $5.30. The mid-point of the guidance indicates a year-over-year improvement of 68%.
Earnings Surprise History: The company has a trailing four-quarter average earnings surprise of 11.4%.
Upbeat Estimate Revision Activity: The Zacks Consensus Estimate for the company’s fiscal 2021 earnings has moved 11.2% north over the past 60 days.
Positive Growth Projections: The Zacks Consensus Estimate for the fiscal 2021 earnings per share is currently pegged at $5.27, indicating year-over-year growth of 63.6%. The stock has an estimated long-term earnings growth rate of 10%.
Valuation is Inexpensive: The trailing 12-month EV/EBITDA ratio is 7.5 for the company, while the industry's average trailing 12-month EV/EBITDA ratio is 20.3.
Other Driving Factors
Greif is witnessing broad-based improvement in several of its key end markets. The company’s Global Industrial Packaging segment has been recording solid volume growth for chemicals, specialty chemicals and lubricants. It witnessed impressive growth in the global rigid Intermediate Bulk Container (IBC) and large plastic drum during the fiscal third quarter. The segment will continue to benefit from these factors in the fiscal fourth quarter as well.
The Paper Packaging & Services segment has been gaining from strong volumes in converting operations and higher selling prices owing to increases in the published containerboard and boxboard prices. The improved demand for textiles and protective packaging has been driving tube and core volumes. This momentum is likely to continue in the fiscal fourth quarter.
In February 2019, the company acquired Caraustar Industries, Inc. and is currently integrating its operations. The buyout has strengthened Greif’s leadership in industrial packaging, and significantly bolstered its margins, free cash flow and profitability. It continues to anticipate run rate synergies of at least $70 million by 2022.
Greif will benefit from its focus on operational execution, capital discipline, and a solid and diverse product portfolio. The company will continue to focus on its restructuring activities, which include optimizing and integrating operations in the Paper Packaging & Services segment, rationalizing operations, and closing underperforming assets in the Global Industrial Packaging segment. Moreover, it has been implementing price increases in response to the robust demand, and combating cost inflation, which is likely to aid earnings. Efforts to lower the debt level also bode well.
Other Stocks to Consider
Other top-ranked stocks in the Industrial Products sector include Encore Wire Corporation (WIRE - Free Report) , Deere & Company (DE - Free Report) and Lincoln Electric Holdings, Inc. (LECO - Free Report) . While Encore Wire and Deere sport a Zacks Rank #1, Deere carries a Zacks Rank #2, at present.
Encore Wire has a projected earnings growth rate of 332.6% for fiscal 2021. So far this year, the company’s shares have gained 45%.
Deere has an estimated earnings growth rate of 117.5% for fiscal 2021. The company’s shares have rallied 36.3%, so far this year.
Lincoln Electric has an expected earnings growth rate of 45.1% for 2021. The stock has appreciated 22%, year to date.