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Greif (GEF) Down 2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Greif (GEF - Free Report) . Shares have lost about 2% in that time frame, outperforming 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 drivers.

Greif Q3 Earnings & Sales Top Estimates, Hikes '21 View

Greif reported third-quarter fiscal 2021 adjusted earnings per share of $1.93, which surpassed the Zacks Consensus Estimate of $1.60. The bottom line improved 127% year on year. Strong end-market demand drove the company’s bottom-line results despite material cost inflation and labor shortages.

Including one-time items, earnings per share was $1.89 in the quarter compared with 35 cents in the prior-year quarter.

Operational Update

Sales surged 38% year over year to $1,491 million. The top line beat the Zacks Consensus Estimate of $1,432 million.

Cost of sales was up 36% year over year to $1,172 million. Gross profit amounted to $319 million, reflecting growth of 45.1% from the prior-year quarter. Gross margin came in at 21.3% compared with the year-ago quarter’s 20.2%.

Selling, general and administrative (SG&A) expenses were up 18.4% year over year to $143 million. Operating profit soared 179.6% year over year to $173 million. Operating margin was 11.6% in the reported quarter compared with 5.7% in the year-earlier period. Adjusted EBITDA increased 49.2% year over year to $237.8 million in the fiscal third quarter.

Segmental Performance

Sales in the Global Industrial Packaging segment increased 47% year over year to $908 million. The segment’s adjusted EBITDA amounted to $146.2 million compared with the year-ago quarter’s $84.5 million.

The Paper Packaging segment sales rose 26% year over year to $579 million in the fiscal third quarter. The segment’s adjusted EBITDA moved up to $89.9 million from the prior-year quarter’s $72 million.

The Land Management segment’s sales totaled $4.2 million in the reported quarter compared with $5.9 million in the year-ago quarter. Adjusted EBITDA was $1.7 million, down from the year-earlier quarter’s $2.9 million.

Financials

Greif reported cash and cash equivalents of $99.8 million as of the fiscal third-quarter 2021-end, compared with $105.9 million as of the end of fiscal 2020. Cash flow from operating activities totaled $95 million in the quarter under review compared with $135 million in the prior-year quarter.

Long-term debt amounted to $2,089.7 million as of Jun 31, 2021 compared with $2,335.5 million as of Oct 31, 2020.

On Aug 31, Greif’s board announced a quarterly cash dividend of 46 cents per share of Class A Common Stock and 69 cents per share of Class B Common Stock. The dividend payout will be made on Oct 1, to shareholders of record at the close of business on Sep 17, 2021.

Outlook

Given strong end-market demand, Greif now expects fiscal 2021 adjusted earnings per share between $5.10 and $5.30, up from prior guidance of $4.55 and $4.85. Adjusted free cash flow is anticipated between $335 million and $365 million, up from previous guidance of $285-$325 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 33.75% due to these changes.

VGM Scores

At this time, Greif has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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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