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Greif, Inc. GEF is poised well to benefit from improvement in many of its key markets and pricing actions. Focus on operational execution, restructuring actions and capital discipline will also drive growth. Further, the producer of industrial packaging products has a strong and diverse product portfolio that provides it with a competitive edge.
The company currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1, or 2 (Buy), or 3 (Hold), offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Let’s take a look into the factors that make this stock a lucrative choice for investors right now.
Greif’s shares have soared 87.8% over the past year compared with the industry’s growth of 39.9%. It has also outperformed the S&P 500’s rally of 38.8% over the same period.
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Solid Q2 Performance
Greif’s second-quarter fiscal 2021 (ended Apr 30, 2021) adjusted earnings per share improved 18.9% year over year to $1.13 on strong business performance and solid customer demand. Earnings also surpassed the Zacks Consensus Estimate of $1.11 as well as the company’s guidance of 96 cents-$1.06.
Upbeat Outlook for Fiscal 2021
Greif’s adjusted earnings per share guidance for fiscal 2021 is anticipated to be $4.55-$4.85. The mid-point of the guidance indicates year-over-year improvement of 46%.
Estimates Going Up
Over the past month, the Zacks Consensus Estimate for fiscal 2021 earnings has increased around 31%. The estimate for fiscal 2022 has also been revised upward by 28% over the same time frame.
Positive Earnings Surprise History
Greif has a trailing four-quarter earnings surprise of 6%, on average.
Healthy Growth Prospects
The Zacks Consensus Estimate for Greif’s earnings for fiscal 2021 is currently pegged at $4.71, suggesting year-over-year growth of 46.3%. In fiscal 2022, earnings is expected to witness an improvement of 8% to $5.09.
Growth Drivers in Place
Greif continues to see increased demand from food, pharmaceutical and household goods industries owing to the COVID-19 pandemic. The company is witnessing broad-based improvement in several of its key end markets. The industrial sector has exhibited a pickup in activity over the past few months, and sales to lubricant and bulk chemical customers have been high, aided by enhanced auto demand and generally improving industrial conditions worldwide. Tanks and coating sales are improving on better auto and construction demand, while sales to pharma and personal care markets remain robust. Moreover, the company has been implementing price increase to combat inflated costs, which is likely to aid earnings.
In February 2019, the company completed the acquisition of Caraustar Industries, Inc. and is currently integrating its operations. The buyout strengthened Greif’s leadership in industrial packaging and significantly bolstered its margins, free cash flow and profitability. It continues to anticipate run rate synergies to at least $70 million by 2022. This will be backed by footprint optimization, unlocking incremental sourcing/commercial opportunities and savings related to system implementations.
Greif will continue to benefit from focus on operational execution, capital discipline, and a strong and diverse product portfolio. The company has initiated variable cost reduction plans, which include plant rationalization, furloughs and shift reductions that will aid margins. Its ongoing restructuring activities that includes optimizing and integrating operations in the Paper Packaging & Services segment, rationalizing operations and closing underperforming assets in the Global Industrial Packaging segment will also lead to savings.
Other Stocks to Consider
Some other top-ranked stocks in the industrial products sector are Tennant Company TNC, Encore Wire Corporation WIRE and Arconic Corporation ARNC. All of these stocks sport a Zacks Rank #1, at present.
Tennant has an anticipated earnings growth rate of 49.5% for the current year. The company’s shares have gained around 26% in the past year.
Encore Wire has an estimated earnings growth rate of 49.5% for the ongoing year. In a year’s time, the company’s shares have rallied nearly 69%.
Arconic has a projected earnings growth rate of 447% for the current year. The stock has soared around 128% in the past year.
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Greif, Inc. (GEF) : Free Stock Analysis Report
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