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Greif (GEF) Up 17.5% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Greif (GEF). Shares have added about 17.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Greif due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Greif Earnings & Revenues Surpass Estimates in Q1

Greif reported first-quarter fiscal 2021 adjusted earnings per share of 61 cents for, which surpassed the Zacks Consensus Estimate of 53 cents. It also came in higher than the company’s guidance of 48 cents to 58 cents However, the bottom line declined 5% year on year. Gains from higher volumes were offset by higher input costs and transportation expenses.

Including one-time items, earnings per share declined to 40 cents per share from the year-ago quarter’s 55 cents per share.
Operational Update

Sales were up 3% year over year to $1,147 million. The top line beat the Zacks Consensus Estimate of $1,096 million.

Cost of sales was up 5% year over year to $934 million. Gross profit amounted to $212 million, reflecting a decline of 5% from the prior-year quarter. Gross margin came in at 18.5% compared with the year-ago quarter’s 20%.

Selling, general and administrative (SG&A) expenses dipped 1% year over year to $134 million. Operating profit was down 11% year over year to $78 million. Operating margin was 6.8% in the reported quarter compared with 7.8% in the year-earlier period. Adjusted EBITDA declined 6% year over year to $138.5 million in the fiscal first quarter.

Segmental Performance

Greif has combined the Rigid Industrial Packaging & Services segment and Flexible Products & Services segment into a single reportable segment known as Global Industrial Packaging.

Sales in the Global Industrial Packaging segment increased 4% year over year to $659 million. The segment’s adjusted EBITDA improved 19% year over year to $80 million.

The Paper Packaging segment sales rose 1.5%, year over year to $481 million in the fiscal first quarter. The segment’s adjusted EBITDA slumped to $56.1 million from prior-year quarter’s $77.9 million.

The Land Management segment’s sales totaled $6.3 million in the reported quarter compared with $7.0 million in the year-ago quarter. Adjusted EBITDA was $2.9 million, flat year over year.

Financials

Greif reported cash and cash equivalents of $101.4 million as of fiscal first quarter 2021-end, compared with $105.9 million as of end of fiscal 2020. Cash flow from operating activities came in at around $11.5 million in the quarter under review compared with $19.5 million in the prior-year quarter.

Long-term debt amounted to $2,359.6 million as of Jan 31, 2021 compared with $2,335 million as of Oct 31, 2020. The company had $420.9 million of available borrowing capacity within its $800.0 million revolving credit facility.

On Feb 23, Greif’s board announced a quarterly cash dividend of 44 cents per share of Class A Common Stock and 66 cents per share of Class B Common Stock. The dividend payout will be made on Apr 1, 2021, to shareholders of record at the close of business on Mar 19, 2021.

Outlook

Greif expects second-quarter fiscal 2021 adjusted earnings per share between 96 cents and $1.06.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

At this time, Greif has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Greif has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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