Back to top

Image: Bigstock

Will Q2 Earnings Hold a Surprise for Greif (GEF) Stock?

Read MoreHide Full Article

Greif, Inc. (GEF - Free Report) is slated to report second-quarter fiscal 2016 results before the market opens on June 8. Its adjusted earnings surged roughly 33% year over year in first-quarter fiscal 2016. Let’s see how things are shaping up prior to this announcement.

Earnings Whispers

Our proven model does not conclusively show that Greif is likely to beat the Zacks Consensus Estimate this quarter.  This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Earnings ESP for Greif is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 57 cents.

Zacks Rank: Greif carries a Zacks Rank #3. However, the 0.00% ESP makes surprise prediction difficult.

Surprise History

Last quarter, the company recorded a positive earnings surprise of 21.21%. In fact, Greif has an impressive earnings history. The company delivered positive surprises in each of the trailing four quarters with an average beat of 32.16%.

Factors at Play

Greif has been progressing with its strategic transformation plan to better align resources to the needs of customers and improve returns on invested capital. The company has sold non-core assets and operations that no longer support its business portfolio. These actions will be accretive to near-term earnings.

Greif is also on track with its growth initiatives. The company has completed two important expansions. The modernization of the Riverville Mill was completed on time as well as under budget. The addition of a second corrugator in North Carolina has also been completed as planned. This project will add an incremental 55,000 ton of annual container work capacity at Riverville, thereby bringing Greif’s pro forma capacity to approximately 780,000 tons.

In addition, Greif’s global intermediate bulk container expansion has now reached 12 existing production lines, which are capable of producing around 1.8 million units. This should also drive near-term growth.

However, sluggish global industrial economy, weaker containerboard prices and continued strengthening of the U.S. dollar are likely to have an adverse impact on the company’s earnings.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Colfax Corporation (CFX - Free Report) has an Earnings ESP of +2.56% and a Zacks Rank #3.

Dover Corporation (DOV - Free Report) has an Earnings ESP of +2.33% and a Zacks Rank #3.

Reliance Steel & Aluminum Co. (RS - Free Report) has an Earnings ESP of +6.30% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>