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BMO Capital Downgrades Greif to ‘Underperform’

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Price movement

Greif (GEF) fell 0.69% to close at $53 per share during the third week of December 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -0.69%, -0.53%, and 79.6%, respectively, as of December 23.

GEF is trading 0.37% below its 20-day moving average, 4.2% above its 50-day moving average, and 28.2% 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 YTD price movement of VB was 18.8% on December 23.

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

  • International Paper (IP): $22.2 billion
  • Sonoco Products (SON): $5.3 billion
  • Silgan Holdings (SLGN):— $2.8 billion

GEF’s rating

On December 22, 2016, BMO Capital downgraded Greif’s rating to “underperform” from “market perform.” It also raised the stock’s price target to $48 from $36 per share.

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Performance of Greif in fiscal 4Q16

Greif reported fiscal 4Q16 net sales of $867.6 million, a fall of 0.10% compared to $868.5 million in fiscal 4Q15. The company’s gross profit margin and operating margin expanded 180 basis points and 250 basis points, respectively, in fiscal 4Q16 compared to fiscal 4Q15.

Its net income, EPS (earnings per share) of its Class A shares, and EPS of its Class B shares fell to $8.5 million, $0.14, and $0.22, respectively, in fiscal 4Q16. That compares to $12.4 million, $0.21, and $0.32, respectively, in fiscal 4Q15.

Fiscal 2016 results

In fiscal 2016, GEF reported net sales of $3.3 billion, a fall of 8.1% YoY (year-over-year). The company’s gross profit margin and operating margin expanded 210 basis points and 150 basis points, respectively, in fiscal 2016.

Its net income, EPS of its Class A shares, and EPS of its Class B shares rose to $74.9 million, $1.28, and $1.90, respectively, in fiscal 2016. That compares to $71.9 million, $1.23, and $1.83, respectively, in fiscal 2015.

GEF’s cash and cash equivalents and inventories fell 2.4% and 6.6%, respectively, in fiscal 2016. Its current ratio fell to 1.4x in fiscal 2016 compared to 1.6x in fiscal 2015.

Greif expects EPS for its Class A shares to be $2.78–$3.08 before special items in fiscal 2017.

Now let’s take a look at Estée Lauder (EL).

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