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Bank of America Merrill Lynch Downgrades Graphic Packaging Holding

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Price movement

Graphic Packaging Holding Company (GPK) has a market cap of $4.4 billion. It fell 1.4% to close at $13.79 per share on October 3, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -2.1%, -5.0%, and 8.7%, respectively, on the same day.

GPK is trading 1.8% below its 20-day moving average, 1.2% below its 50-day moving average, and 6.9% 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 GPK. The ETF 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. The YTD price movement of VBR was 12.9% on October 3.

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

  • International Paper (IP): $19.7 billion
  • WestRock Company (WRK): $12.2 billion

GPK’s rating

Bank of America Merrill Lynch has downgraded Graphic Packaging Holding Company’s rating to “neutral” from “buy.”

On September 30, 2016, RBC Capital has initiated its coverage of Graphic Packaging Holdings Company with an “outperform” rating and also set the stock’s price target at $17.00 per share.

Performance of Graphic Packaging in 2Q16

Graphic Packaging (GPK) reported 2Q16 net sales of $1.1 billion, a rise of 4.4% compared to $1.2 billion in 2Q15. The company’s cost of sales as a percentage of net sales rose 0.20%, and its income from operations fell 4.2% in 2Q16 compared to 2Q15. 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[1. earnings before interest, tax, depreciation, and amortization] of $195.2 million in 2Q16, a rise of 1.6% compared to 2Q15.

GPK’s cash and cash equivalents fell 29.5%, and its inventories rose 5.9% in 2Q16 compared to 4Q15. 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 $37.0 million in shares in 2Q16.

Next, let’s take a look at Skechers USA (SKX).

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