Greif (GEF) Q3 Earnings Beat, Sales Miss on Low Volumes
Greif, Inc. GEF reported adjusted earnings per share (EPS) of $1.75 in third-quarter fiscal 2022 (ended Jul 31, 2023), surpassing the Zacks Consensus Estimate of $1.56. The bottom line fell 26% year over year.
Including one-time items, EPS was $1.55 in the quarter compared with $2.36 in the prior-year quarter.
Operational Update
Sales were down 18% year over year to $1.33 billion. The top line missed the Zacks Consensus Estimate of $1,335 million. The downfall was mainly due to decline in volumes, lower selling prices, unfavorable product mix, and the impact of changes in foreign currencies against the U.S. Dollar.
The cost of sales was down 19.8% year over year to $1.02 billion. Gross profit amounted to $307 million, down 11.5% from the prior-year quarter. The gross margin came in at 23.1%, up from the prior year’s 21.4%.
Selling, general and administrative (SG&A) expenses were $136 million compared with the prior-year quarter’s $142 million. Adjusted EBITDA fell 9.8% year over year to $227 million in the fiscal third quarter.
Greif, Inc. Price, Consensus and EPS Surprise
Greif, Inc. price-consensus-eps-surprise-chart | Greif, Inc. Quote
Segmental Performance
Sales in the Global Industrial Packaging segment were $762 million, lower than the prior-year quarter’s $907 million, due to lower volumes and selling prices. Our model had projected revenues of $720 million for the quarter. The segment’s adjusted EBITDA amounted to $127 million compared with the year-ago quarter’s $117 million. The reported figure surpassed our estimate of $100 million.
The Paper Packaging segment sales fell 20.6% year over year to $564 million in the fiscal third quarter owing to decline in volumes and lower selling prices. The figure missed our estimated sales of $600 million. The segment’s adjusted EBITDA moved down to $98 million from the prior-year quarter’s $132 million. We projected the segment’s adjusted EBITDA to be $111 million.
The Land Management segment’s sales totaled $4.6 million in the reported quarter compared with $5.2 million in the year-ago quarter. We projected the segment's sales to be $5 million in the quarter. Adjusted EBITDA was $1.9 million compared with the year-earlier quarter’s $2.1 million. Our projection for the quarter’s adjusted EBITDA was $2.1 million.
Financial Position
Greif reported cash and cash equivalents of $158 million at the end of third-quarter fiscal 2023 compared with $147 at the end of fiscal 2022. Cash flow from operating activities totaled $202 million in the quarter under review compared with $209 million in the prior-year quarter.
The long-term debt amounted to $2.08 billion as of Jul 31, 2023, compared with $1.84 billion as of Oct 31, 2022.
Strategic Initiatives
Greif announced that on Aug 23, 2023, it acquired a 51% ownership interest in ColePak, LLC, the second largest supplier of paper partitions in North America company,. The inclusion of ColePak to the Greif paper converting portfolio introduces a product option that provides integration to the Greif mill system in containerboard and URB grades.
The company declared a hike in its quarterly dividend per share by 2 cents for Class A shares and 3 cents for Class B shares. The hike in the quarterly dividend is in sync with the company’s broader capital allocation strategy.
Outlook
Greif expects fiscal 2023 adjusted EBITDA between $790 million and $820 million. The adjusted free cash flow is anticipated between $400 million and $430 million.
Price Performance
The company’s shares have gained 9.9% in the past year against the industry’s fall of 1.2%.
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Zacks Rank & Stocks to Consider
Greif currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Caterpillar Inc. CAT, Astec Industries, Inc. ASTE and A. O. Smith Corporation AOS. CAT and ASTE sport a Zacks Rank #1 (Strong Buy) at present, and AOS has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Caterpillar has an average trailing four-quarter earnings surprise of 18.5%. The Zacks Consensus Estimate for CAT’s 2023 earnings is pegged at $19.81 per share. The consensus estimate for 2023 earnings has moved north by 11.4% in the past 60 days. Its shares gained 51.6% in the last year.
Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $2.81 per share. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. ASTE’s shares gained 22.8% in the last year.
The Zacks Consensus Estimate for A. O. Smith’s 2023 earnings per share is pegged at $3.57. The consensus estimate for 2023 earnings has moved 5% north in the past 60 days. It has a trailing four-quarter average earnings surprise of 10.5%. AOS gained 11.1% in the last year.
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