Stifel, a financial services firm, has adjusted its outlook on Greif Inc. (NYSE: NYSE:GEF), a global leader in industrial packaging products and services. The firm's analyst has revised the price target to $85.00, down from the previous $88.00, while sustaining a Buy rating on the company's shares.
Greif Inc. has been experiencing varying degrees of recovery across its diverse end markets, geographic regions, and product substrates. Despite these challenges, volumes remain significantly lower than historical norms, with a reported double-digit decrease.
Nonetheless, the analyst remains optimistic about Greif's financial prospects, citing that the company's fiscal year 2024 (FY24) midpoint Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (AEBITDA) guidance of $700 million is achievable through existing pricing strategies, without needing further volume recovery.
Looking forward to fiscal year 2025 (FY25), the analyst's estimate of $807 million in AEBITDA for Greif includes the anticipated benefits from the acquisition of IPACKCHEM, a specialist in high-performance packaging, and the price setting actions taken in FY24. Additionally, the forecast incorporates the expected contribution from the new Dallas sheet feeder operation and a modest single-digit organic growth.
The analyst further elaborated that a return to the volume levels seen in 2022 could potentially elevate FY25 AEBITDA beyond $900 million.
In other recent news, Greif, Inc. reported significant growth in the third quarter of 2024, with an emphasis on polymer-based packaging solutions. The company achieved net growth globally, with North America and Latin America showing higher demand and improvements in volume performance, particularly in the lubes, chemicals, paints, and coatings end markets. A strategic reorganization is underway, focusing on polymer-based packaging solutions. In addition, Greif is planning an Investor Day on December 11, 2024, to discuss future plans in detail.
Despite economic challenges in the URB space, the company is operating at full capacity in its containerboard business. Greif has a robust pipeline for mergers and acquisitions, but debt repayment remains the current priority. The company did not provide specific numbers on the correlation between their North American GIP business and the housing market.
InvestingPro Insights
As Greif Inc. navigates through its recovery phase and strategic initiatives, InvestingPro data and tips shed light on its current financial health and market position. With a market capitalization of $3.02 billion and a P/E ratio of 11.41, which adjusts to a lower 9.78 on a last twelve months basis as of Q2 2024, the company presents a value proposition in terms of earnings. The dividend yield as of the latest data stands at a notable 3.49%, complemented by a consistent dividend growth of 8.0% over the last twelve months, highlighting the company's commitment to shareholder returns. This is further evidenced by Greif's track record of maintaining dividend payments for 52 consecutive years.
InvestingPro Tips also point out that Greif has raised its dividend for three consecutive years and the valuation implies a strong free cash flow yield, which could be appealing to income-focused investors. Moreover, the stock generally trades with low price volatility, suggesting a level of stability in its share price. For those seeking more in-depth analysis, InvestingPro offers additional tips on Greif Inc., which can be explored further at Investing.com/pro/GEF.
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