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Moody’s Rated Graphic Packaging’s Notes as ‘Ba2’

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Price movement

Graphic Packaging Holding (GPK) rose by 0.22% and closed at $13.80 per share during the second week of August 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 0.22%, 4.4%, and 8.4%, respectively, as of August 12. Graphic Packaging is trading 2.2% above its 20-day moving average, 5.2% above its 50-day moving average, and 7.7% above its 200-day moving average.

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Related ETF and peers

The Vanguard Small-Cap Value ETF (VBR) invests 0.26% of its holdings in Graphic Packaging. VBR aims to track the CRSP US Small-Cap Value Index. The index selects from a list of stocks in the 85%–99% range of market cap based on five value factors. VBR’s YTD price movement was 12.4% on August 12.

The market caps of Graphic Packaging’s peers are as follows:

  • International Paper Company (IP) – $19.3 billion
  • WestRock Company (WRK) – $11.4 billion

Moody’s rated Graphic Packaging’s notes

Moody’s rated Graphic Packaging International’s new $300 million senior unsecured notes due in 2024 as “Ba2.” The net proceeds from these offerings and $5 million cash on the balance sheet will be used to repay $300 million revolver borrowings and to pay fees and expenses related to the transaction.

Moody’s kept the company’s corporate family rating of Ba1, the probability of default rating of Ba1-PD, and other instruments ratings unchanged. It also provided the stock’s rating outlook as “stable.”

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Performance in 2Q16

Graphic Packaging reported 2Q16 net sales of $1.1 billion—a rise of 4.4% over net sales of $1.1 billion in 2Q15. The company’s cost of sales as a percentage of net sales rose by 0.20% and its income from operations fell by 4.2% between 2Q15 and 2Q16. It reported business combinations and other special charges of $5.3 million in 2Q16—compared to $3.9 million in 2Q15.

Its net income and EPS (earnings per share) rose to $77.8 million and $0.24, respectively, in 2Q16—compared to $57.6 million and $0.17, respectively, in 2Q15. It reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $195.2 million in 2Q16—a rise of 1.6% over 2Q15.

Graphic Packaging’s cash and cash equivalents fell by 29.5% and its inventories rose by 5.9% between 2Q15 and 2Q16. Its current ratio and long-term debt-to-equity ratio rose to 1.6x and 2.0x, respectively, in 2Q16—compared to 1.5x and 1.7x, respectively, in 4Q15. The company repurchased shares worth of $37.0 million in 2Q16.

Quarterly dividend

Graphic Packaging declared a quarterly dividend of $0.05 per share on its common stock. The dividend will be paid on October 5, 2016, to shareholders of record at the close of business on September 15, 2016.

In the next part, we’ll take a look at Coach (COH).

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