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Greif's (GEF) Q4 Earnings Trump, Sales Lag Estimates, Up Y/Y

Greif, Inc. GEF reported adjusted earnings per share of $1.24 for fourth-quarter fiscal 2019 (ended Oct 31, 2019), beating the Zacks Consensus Estimate of $1.11. The figure also improved 14.8% year over year. The company registered year-over-year improvement in earnings despite a weakening industrial economy.

Including one-time items, earnings per share increased to $1.09 per share from the year-ago quarter’s 67 cents per share.

Operational Update

Sales climbed 24.7% year over year to $1,232.1 million. However, the reported figure lagged the Zacks Consensus Estimate of $1,277 million.

Cost of sales went up 24.2% year over year to $973.1 million. Gross profit came in at $259 million, recording an improvement of 26.3% from the prior-year quarter. Gross margin came in at 21.0% compared with the year-ago quarter’s 20.7%.

Selling, general and administrative (SG&A) expenses flared up 42.5% year over year to $130.4 million. Operating profit jumped 12% year over year to $115.7 million. Operating margin was 9.4% in the reported quarter compared with the 10.4% recorded in the quarter last year. Adjusted EBITDA increased 31.6% year over year to $186.8 million in the reported quarter.

Greif, Inc. Price, Consensus and EPS Surprise

Segmental Performance

Sales in the Rigid Industrial Packaging & Services declined 6.6% year over year to roughly $619 million. The segment’s adjusted EBITDA dropped to $69.5 million from the year-ago quarter’s $71.0 million.

The Paper Packaging segment sales soared 118.5%, year over year, to $535.1 million. This upside was driven by the $322.6-MILLION contribution from the Caraustar acquisition. This was partly offset by lower published containerboard prices, 12,000 tons of containerboard economic downtime and 6,500 tons of containerboard maintenance downtime. The segment’s adjusted EBITDA increased to $108.7 million from the $62.1 million reported in the comparable period last year.

Sales in the Flexible Products & Services segment declined 8.4% year over year to $70.9 million. The segment reported adjusted EBITDA of $5.8 million compared with the $5.3 million recorded in the year-earlier quarter.

The Land Management segment’s sales dipped 5.3% year over year to $7.1 million and adjusted EBITDA dropped 9.6% year over year to $2.8 million.

Financials

Greif ended fiscal 2019 with cash and cash equivalents of $77.3 million compared with the $94.2 million recorded as of the end of fiscal 2018. Cash flow from operating activities came in at $389.5 million during fiscal 2019 compared with the $253 million reported in the last fiscal year.

On Dec 3, Greif’s board of directors announced a quarterly cash dividend of 44 cents per share of Class A Common Stock and 65 cents per share of Class B Common Stock. The dividend payout will be made on Jan 1, 2020, to stockholders of record at the close of business on Dec 18, 2019.

Fiscal 2019 Performance
 
Adjusted earnings for fiscal 2019 came in at $3.96, up 12.2% year over year. The reported figure also beat the Zacks Consensus Estimate of $3.82. Including one-time items, the company reported earnings of $2.89 per share, lower than the $3.55 per share recorded in the prior fiscal year. Revenues increased 18.6% year over year to $4.59 billion. However, the revenue figure missed the Zacks Consensus Estimate of $4.65 billion.

Outlook

Greif has issued its adjusted earnings per share guidance for fiscal 2020 at $3.63-$4.13. The mid-point of the guidance reflects year-over-year growth of 3.5%. Adjusted free cash flow is predicted between $245 million and $285 million for the fiscal year.
 
Price Performance

Over the past three months, Greif’s shares have appreciated 22.2% outperforming the industry’s growth of 5.9%.



Zacks Rank & Key Picks

Greif currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector are Northwest Pipe Company NWPX, Tennant Company TNC and Sharps Compliance Corp SMED. All of these stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today's Zacks #1 Rank stocks here.

Northwest Pipe has an expected earnings growth rate of 15.8% for the current year. The stock has appreciated 52.3% over the past year.

Tennant has a projected earnings growth rate of 29.8% for 2019. The company’s shares have rallied 38.2% over the past year.

Sharps Compliance has an outstanding estimated earnings growth rate of 500% for the ongoing year. In a year’s time, the company’s shares have gained 30.9%.

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