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How Much Did Jefferies Reduce Graphic Packaging’s Price Target?

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Price movement of Graphic Packaging Holding

Graphic Packaging Holding Company (GPK) has a market capitalization of $3.9 billion. GPK fell by 0.67% to close at $11.89 per share as of February 10, 2016. The stock’s price movements on a weekly, monthly, and year-to-date (or YTD) basis are 5.4%, -3.2%, and -7.3%, respectively.

At times, the stock has broken the support of all of its moving averages. Currently, GPK is trading 2.9% above its 20-day moving average, 3.8% below its 50-day moving average, and 12.6% below its 200-day moving average.

The PowerShares DWA Momentum ETF (PDP) invests 1.2% of its holdings in GPK. The ETF tracks an index of 100 US-listed large- and mid-cap companies selected and weighted by relative stock performance. The YTD price movement of PDP is -12.8% as of February 9, 2016.

The Vanguard Materials ETF (VAW) invests 0.65% of its holdings in GPK. The ETF tracks a very broad market-cap–weighted index of US materials companies.

The market capitalizations of GPK’s competitors are as follows:

  • International Paper Company (IP) — $14.4 billion
  • WestRock Company (WRK) — $8.1 billion
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Jefferies reduced GPK’s price target

Jefferies has reduced Graphic Packaging price target from $17 to $15 per share and maintained its rating of “buy” on the stock.

Performance of Graphic Packaging Holding Company in 4Q15 and 2015

Graphic Packaging reported 4Q15 net sales of $1,024.9 million, a rise of 2.4% compared to net sales of $1,001.1 million in 4Q14. Net tons of paperboard packaging sold rose by 4.6% in 4Q15 compared to 4Q14. The company’s cost of sales as a percentage of net sales fell by 1.2%, and its operating income rose by 14.5% in 4Q15 compared to 4Q14.

GPK’s net income and EPS (earnings per share) rose to $57.2 million and $0.17, respectively, in 4Q15, compared to $41.5 million and $0.13, respectively, in 4Q14.

2015 results

In 2015, GPK reported net sales of $4,160.2 million, a fall of 1.9% YoY (year-over-year). Its net income and EPS rose to $230.1 million and $0.70, respectively, in 2015, compared to $89.7 million and $0.27, respectively, in 2014.

Meanwhile, its cash and cash equivalents fell by 32.7%, and its inventories rose by 6.8% in 2015. Its current ratio and long-term debt-to-equity ratio fell to 1.5 and 1.7, respectively, in 2015, compared to 1.6 and 1.9, respectively, in 2014.

The price-to-earnings and price-to-book value ratios of GPK are 18.3x and 3.6x, respectively, as of February 10, 2016.

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