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How Did Greif Perform in 3Q16?

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Price movement

Greif (GEF) has a market cap of $2.3 billion. It fell by 0.86% to close at $42.63 per share on August 31, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 2.1%, 8.6%, and 42.1%, respectively, on the same day. GEF is trading 2.9% above its 20-day moving average, 7.2% above its 50-day moving average, and 28.5% above its 200-day moving average.

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Related ETF and peers

The Vanguard Small-Cap ETF (VB) invests 0.03% of its holdings in Greif. The ETF tracks the CRSP US Small Cap Index. The market-cap-weighted index includes the bottom 2%–15% of the investable universe. The YTD price movement of VB was 11.1% on August 31.

The market caps of Greif’s competitors are as follows:

  • International Paper (IP) — $19.9 billion
  • Sonoco Products (SON) — $5.2 billion
  • Silgan Holdings (SLGN) — $2.9 billion

Performance of Greif in fiscal 3Q16

Greif reported fiscal 3Q16 net sales of $845.0 million, a fall of 9.1% from the net sales of $930.0 million in fiscal 3Q15. Net sales from rigid industrial packaging and services, paper packaging and services, and flexible products and services fell by 10.8%, 2.4%, and 11.7%, respectively, and sales from land management rose by 13.7% between fiscals 3Q15 and 3Q16. The company’s gross profit margin and operating profit rose by 16.5% and 62.0%.

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Its net income, Class A EPS (earnings per share), and Class B EPS rose to $46.1 million, $0.78, and $1.18, respectively, in fiscal 3Q16, compared with $8.6 million, $0.15, and $0.22 in fiscal 3Q15. It reported consolidated EBITDA (earnings before interest, tax, depreciation, and amortization) of $101.2 million in fiscal 3Q16, a rise of 29.7% from fiscal 3Q15.

GEF’s cash and cash equivalents and inventories fell by 11.2% and 2.9%, respectively, between fiscals 4Q15 and 3Q16. Its current ratio and long-term debt-to-equity fell to 1.0x and 1.3x, respectively, in fiscal 3Q16, compared with 1.6x and 1.5x, respectively, in fiscal 4Q15. It reported free cash flow of $73.7 million in fiscal 3Q16, a rise of 19.8% from fiscal 3Q15.

Quarterly dividends

Greif declared quarterly cash dividends of $0.42 per share on its Class A common stock and $0.63 per share on its Class B common stock. The dividends will be paid on October 1, 2016, to shareholders of record at the close of business on September 19, 2016.

Projections

The company has made the following projections for fiscal 2016:

  • class A EPS before special items in the range of $2.36 to $2.56
  • capital expenditures in the range of $95 million to $110 million
  • free cash flow in the range of $160 million to $190 million
  • restructuring expense in the range of $20 million to $30 million
  • tax rate in the range of 35% to 38%

For an ongoing analysis of this sector, visit Market Realist’s Consumer Discretionary page.

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