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Greif (GEF) to Divest 50% Stake in Flexible Packaging for $123M

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Greif, Inc. GEF signed an agreement to sell its 50% ownership in the Flexible Products & Services (FPS) joint venture (JV) to Gulf Refined Packaging (GRP) for cash proceeds of $123 million. The company expects to utilize the fund for repayment of debt. The deal will likely close by Mar 31, 2022.

Greif and Al-Dabbagh Group formed a 50/50 JV under the name of Flexible Packaging in 2010. During first-quarter 2021, Greif combined the Rigid Industrial Packaging & Services segment and the FPS segment into a single segment — Global Industrial Packaging.

In April 2020, Greif divested its consumer packaging group business to Graphic Packaging for cash proceeds of $85 million. The sale included seven folding carton facilities. The divesture enabled Greif to deleverage its balance sheet and optimize capital allocation. The company would be able to focus on core industrial franchise and strategic growth priorities in Intermediate Bulk Container (IBC) production and containerboard integration.

Greif is witnessing broad-based improvement in several of its key end markets. The company’s Global Industrial Packaging segment has been recording solid volume growth for chemicals, specialty chemicals and lubricants. It witnessed impressive growth in the global rigid IBC and large plastic drums in the last few quarters, backed by the strategic growth investments in the United States and EMEA as well as ongoing recovery in the industrial end markets.

The Paper Packaging & Services segment has been gaining from solid volumes in converting operations and higher selling prices owing to increases in the published containerboard and boxboard prices. Robust demand and pricing increases are likely to negate the impact of cost inflation and contribute to the company’s earnings.

Greif will benefit from its focus on operational execution, capital discipline, and a solid and diverse product portfolio. The company will continue to focus on its restructuring activities, which include optimizing and integrating operations in the Paper Packaging & Services segment, rationalizing operations, and closing underperforming assets in the Global Industrial Packaging segment. The company’s constant efforts to lower debt levels will aid growth.

Greif expects adjusted earnings per share between $5.85 and $6.45 for fiscal 2022. The mid-point of the guidance indicates a year-over-year improvement of 10%.

Price Performance

Greif’s shares have gained 27.5% in the past year compared with the industry’s growth of 13.5%.

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Zacks Rank & Other Stocks to Consider

Greif currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

A few other top-ranked stocks in the Industrial Products sector are Berry Global Group, Inc. BERY, ScanSource, Inc. SCSC and MSC Industrial Direct Co., Inc. MSM. While BERY flaunts a Zacks Rank #1, SCSC and MSM carry a Zacks Rank #2 (Buy).

Berry Global Group has an estimated earnings growth rate of around 2.8% for fiscal 2022. In the past 60 days, the Zacks Consensus Estimate for fiscal 2022 earnings has been revised upward by 18%.

In a year, the company’s shares have increased 30.5%. Berry Global Group has a trailing four-quarter earnings surprise of 16.5%, on average.

ScanSource has an expected earnings growth rate of 18.9% for fiscal 2022. The Zacks Consensus Estimate for fiscal 2022 earnings has been revised upward by 0.9% in the past 60 days.

ScanSource’s shares have rallied 31.4% in the past year. SCSC has a trailing four-quarter earnings surprise of 34.7%, on average.

MSC Industrial has a projected earnings growth rate of 19.9% for fiscal 2022. The Zacks Consensus Estimate for fiscal 2022 earnings has been revised upward by 2.9% in the past 60 days.

MSM’s shares have gained 5.5% in a year. MSC Industrial has a trailing four-quarter earnings surprise of 2.9%, on average.


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