Graphic Package Holding and Vornado Realty have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – June 23, 2023 – Zacks Equity Research shares Graphic Package Holding Co. GPK as the Bull of the Day and Vornado Realty Trust VNO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Walmart WMT, McDonald’s MCD and Procter & Gamble PG.
Here is a synopsis of all five stocks.
Bull of the Day:
Graphic Package Holding Co. is a prominent and dynamic multinational corporation that specializes in providing innovative packaging solutions to various industries. With a strong global presence and a history dating back several decades, GPK has established itself as a leader in the packaging industry.
With a Zacks Rank #1 (Strong Buy), a historically cheap valuation, strong earnings growth and expanding operations, Graphic Packaging Holding Company is a worthy consideration for any investment portfolio.
Industry Leading Products
The company's comprehensive portfolio encompasses a wide range of packaging products, including corrugated containers, folding cartons, displays, and labels. GPK has been capitalizing on the newest trends in consumer packaging and is producing some of the highest quality renewable and recyclable, fiber-based packaging in the industry.
At its most recent quarterly earnings meeting, management announced that Chick-Fil-A, the most profitable fast-food chain in the US, would be launching GPK’s new, highly insulated, double-wall fiber-based cups as a potential long-term solution for their beverage program.
Steady Stock Performance
Graphic Package Holding Company has been an extremely steady and impressive performing stock. Over the last decade GPK has compounded at 14% annually, beating both the broad market and industry. Additionally, GPK offers a tidy 1.6% dividend yield, which has increased 10% annually over the last three years.
Earnings Trend
GPK has experienced consistent revisions higher in its earnings estimates since 2021, following the steady pace of returns in the stock. The last two months have seen especially strong earnings revisions giving it a Zacks Rank #1 (Strong Buy).
Current quarter earnings estimates have been upgraded by 7% over the last two months and are projected to grow 28% YoY. Additionally, FY23 earnings have been upgraded by 10.2% and are expected to climb 30% YoY.
Considering sales are expected to grow 6% YoY in the current quarter and FY23, and earnings are expected to grow multiples of that, GPK is clearly improving business efficiency. The company’s CEO Michael Doss recently noted that “during the (most recent) quarter our newest coated recycled paperboard machine in Kalamazoo exceeded quality, yield and financial expectations,” indicating those upgraded efficiencies.
Reasonable Valuation
Graphic Packaging Holding Company is currently trading at a 10-year low in terms of earnings multiples. Its one-year forward earnings multiple is just 8x, which is well below the market average of 20x, below the industry average of 13x, and its 10-year median of 16.5x.
Bottom Line
While packaging materials may not be quite as sexy as AI or Crypto, Graphic Package Holding Company is making its investors considerable wealth, nonetheless. GPK has an impressive performance history and strong projections for earnings growth. With robust earnings estimate revisions and a cheap valuation GPK stock has the wind at its back.
Bear of the Day:
Vornado Realty Trust, the owner and manager of a considerable portfolio of premium office real estate has been crushed by the shifting commercial real estate market, and explosion of work from home jobs. VNO has endured considerable downgrades to its earnings expectations over the last 18 months giving it a Zacks Rank #5 (Strong Sell).
Company
Vornado Realty Trust is a leading US real estate investment trust (REIT) specializing in commercial properties. Established in 1982, Vornado owns, develops, and manages prime office buildings, retail centers, and residential properties in major markets such as New York City and Washington, DC. The company focuses on strategic investments, value creation through renovations and repositioning. Vornado is also recognized for its commitment to sustainability and is the largest owner of LEED-certified property in the United States, with more than 27 million square feet of LEED-certified properties.
Challenged Environment
Shares in the VNO REIT have suffered over the last five years, down -72% over that time. This is significantly worse than the industry average and broad market. Vornado has a high concentration of buildings in metropolitan areas that have changed dramatically since the Covid-19 pandemic.
While office buildings in NYC were once thought of as premier assets, they have been completely upended by the transition to work from home. While top of the market assets, like those owned by Vornado have held up a bit better than the rest of the market, Manhattan landlords are still struggling to fill their properties. Q1 office vacancy in Manhattan was estimated at 16% and analysts expect more distress in the sector.
Earnings Estimates
Record high vacancies, as well as a high interest rate environment, which strains real estate businesses, does not bode well for VNO’s earnings expectations. Analysts are in near unanimous agreement in downgrading estimates across timeframes.
Current quarter earnings have been revised lower by -4.5% over the last two months and are expected to decline -23% YoY. FY23 earnings have been cut by -4.2% and are projected to slide -20% YoY.
Valuation
Because of the severe decline VNO’s share prices over the last two years, its valuation is at a 10-year low. Vornado Realty Trust is trading at a one-year forward earnings multiple of 6.2x, which is well below the industry average of 14.7x, and below its 10-year median of 18x.
Conclusion
Vornado Realty Trust is under tremendous pressure, and it does not look like things will be getting better anytime soon. While the 9.7% dividend yield may have been the only thing drawing in investors today it may not be worth the risk. Vornado announced a -29% cut in the dividend in January, and in April announced that all dividend payments will be postponed until the end of 2023.
Because of the reasons listed above it is recommended that investors steer clear of Vornado Realty Trust.
Additional content:
3 Low-Beta Stocks Suited Nicely for Risk-Averse Investors
Low-beta stocks would be great considerations for investors looking to shield themselves against volatility, as they have historically shown to be less affected by broader market fluctuations.
To give a quick refresher, beta measures a stock's volatility or systematic risk compared to the overall market.
Stocks with a beta of less than 1.0 provide more stability during volatile periods, and the inverse is also true – stocks with a beta of higher than 1.0 are more susceptible to the broader market’s movements.
For those seeking a more conservative approach, three low-beta stocks – Walmart, McDonald’s and Procter & Gamble – could all be considered.
All three sport a favorable Zacks Rank, have an established track record of stable growth, and consistently shell out dividends, undoubtedly a strong trio. Let’s take a closer look at each.
Walmart
Walmart offers a diverse blend of products at reasonable prices, allowing it to capture revenue from lower and higher-end consumers who decide to ‘trade down’ and save their cash. The stock is currently a Zacks Rank #2 (Buy).
The retail titan posted strong results in its latest release, delivering year-over-year global eCommerce growth of 26% and raising its FY24 outlook. Quarterly revenue totaled $152.2 billion, ahead of expectations and improving 7% from the year-ago period.
In addition, Walmart’s 21.3% trailing twelve-month ROE is certainly worth highlighting, reflecting a higher level of efficiency in generating profits from existing assets. As shown below, the current value is well above the Zacks Retail and Wholesale sector average.
And to top it off, Walmart is a member of the elite Dividend Aristocrat group, putting its shareholder-friendly nature on full display. Shares currently yield 1.5% annually, with the payout growing 2% over the last five years.
McDonald’s
We’re all familiar with the restaurant titan McDonald’s, seeing those golden arches at seemingly every stop. The stock is presently a Zacks Rank #2 (Buy), with earnings expectations increasing across the board.
Shares may not entice value-focused investors, further reflected by the Style Score of “D” for Value. MCD shares currently trade at a 26.6X forward earnings multiple, modestly above the five-year median and Zacks sector average.
Still, investors haven’t minded forking up the premium for shares given the company’s favorable growth trajectory, with earnings forecasted to climb 10% on 8% higher revenues in its current fiscal year (FY23). And in FY24, estimates call for an additional 9% uptick in earnings and 7% sales growth.
Procter & Gamble
Procter & Gamble, a current Zacks Rank #2 (Buy), posted better-than-expected results and provided optimistic guidance in its latest release, helping shares close 3.5% higher post-earnings. Earnings improved 3% year-over-year, whereas revenue saw growth of 4%.
Procter & Gamble is a classic dividend stock, holding the ranks of not only a Dividend Aristocrat but a Dividend King as well. PG shares currently yield 2.5% annually, with the company carrying a solid 6.3% five-year annualized growth rate.
In addition, it’s worth noting that shares have recently found support near the $142 per share level, a previous resistance level for the stock.
Bottom Line
For those seeking a more conservative approach, low-beta stocks provide precisely that. These stocks are less susceptible to the broader market’s movements, helping to limit those spooky price swings.
And all three stocks could be great considerations for those looking for stability.
All three sport a favorable Zacks Rank and have an established track record of success, undeniably significant benefits.
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Procter & Gamble Company (The) (PG) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
McDonald's Corporation (MCD) : Free Stock Analysis Report
Vornado Realty Trust (VNO) : Free Stock Analysis Report
Graphic Packaging Holding Company (GPK) : Free Stock Analysis Report
