Greif, Inc. (GEF - Free Report) has been gaining from focus on capital-expansion projects and favorable price-cost relationship. However, the company might be affected by the prevalent raw material cost inflation.
This Zacks Rank #3 (Hold) company has a market capitalization of around $2.7 billion. The stock has an estimated long-term earnings growth rate of 8.7%.
Below, we briefly discuss the company’s potential growth drivers and possible headwinds.
Factors Favoring Greif
Shares of the company have outperformed the industry, over the past three months. The stock has gained around 7% compared with the 0.2% loss recorded by the industry during the same time period.
Positive Estimate Revisions, Growth Projections
The Zacks Consensus Estimate for fiscal 2018 and fiscal 2019 has been revised nearly 3% and 1% upward, respectively, over the past 30 days. A positive trend in estimate revisions reflects investors’ optimism in the company’s bright prospects.
The Zacks Consensus Estimate for current-fiscal earnings is pegged at $3.57, reflecting estimated year-over-year growth of 21%. The Zacks Consensus Estimate for fiscal 2019 earnings is pegged at $3.89, indicating estimated year-over-year increase of 9%.
Growth Drivers in Place
Greif’s fiscal 2018 results will benefit from steady improvements in the company’s customer services, focus on capital-expansion projects and acquisitions. It will also gain from additional financial flexibility as a result of tax-reform changes regarding cash repatriation.
Notably, Greif expects that its Rigid Industrial Packaging & Services segment will report the strongest adjusted operating profit in fourth-quarter fiscal 2018 due to the timing of raw-material pricing adjustments. Further, its Paper Packaging segment is anticipated to deliver the sturdiest operating profit performance in the fiscal fourth quarter, benefiting from containerboard price increases. In addition, Old corrugated container (OCC) costs are currently favorable when compared with fiscal 2017 levels.
Greif’s near-term performance will likely be marred by the prevalent raw material cost inflation. Its Rigid Industrial Packaging segment continues to experience significant steel price hike due to the Section 232 tariffs. In addition, its performance will be negatively impacted by the turbulent global industrial economy, the strengthening of the U.S. dollar and weaker-than-expected seasonal agricultural sales. Moreover, the company’s China business might continue experiencing lower volumes as a result of the existing competitive market conditions, strategic pricing decisions and a plant closure of a significant customer.
Investors might want to hold on to the stock, at present, as it has ample prospects of outperforming peers in the near future.
Stocks to Consider
Some better-ranked stocks in the same sector are Axon Enterprise, Inc (AAXN - Free Report) , Actuant Corporation (ATU - Free Report) and Terex Corporation (TEX - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Axon Enterprise has an expected long-term earnings growth rate of 25%. The company’s shares have surged 60%, over the past three months.
Actuant has an expected long-term earnings growth rate of 9.4%. The stock has gained 27% in the past three months.
Terex has a long-term earnings growth rate of 21%. The company’s shares have rallied 10%, over the past three months.
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