Greif Inc.: Bear of the Day Play

Greif Inc. (GEFAnalyst Report) recently posted their fourth consecutive massive earnings miss, and second consecutive revenue miss.  Management attributed the recent miss on several items including weakness in Brazil, the U.S. industrial economy which was on a downtrend, and a slowdown in China.  Further, FX headwinds and expected weakness in overall volumes are further obstacles for the company to overcome.  Due to the combination of these factors, Greif Inc. is the Zacks Bear of the Day.

This Zacks Ranked #5 (Strong Sell) company produces and sells industrial packaging products worldwide.  The company has four main segments; Rigid Industrial Packaging & Services, Paper Packaging, Flexible Products & Services, and Land Management segment.  The company produces steel, plastic, fiber, flexible and corrugated containers, packaging accessories and containerboard, and provides bending, filling and packaging services.  It also manages acreage in the United States.

In their most recent quarter, the company saw overall revenues decrease 16.8% y/y; the Rigid Segment experiencing a revenue decline of 15%, the Paper Segment saw revenues drop 21.8%, the Flexible Segment saw revenues drop 22.1%, and Land Management saw positive revenues, but the segment only accounts for less than 1% of total sales.  Further, in all segments outside of Land Management, volumes were either flat or declining.

Estimates Graph

The graph below shows GEF’s historic price levels against the EPS consensus.  As you can see the estimates are significantly declining.

Declining Estimates

Over the past 30 days, estimates have declined for Q3 15, Q4 15, FY 15, and FY 16; Q3 15 fell from $0.63 to $0.42, Q4 15 dropped from $0.76 to $0.49, FY 15 shrank from $2.27 to $1.74, and FY 16 slipped from $2.63 to $2.31.

Bottom Line

Management is in the midst of a transformation thought 2017, but 2015, and 2016 appear to have significant headwinds.  While the story sounds positive, it will take more time to meet management’s expectations.  In the meantime, revenue and volume issues persist.

If you are inclined to invest in the Containers Metal/Glass segment, you would be best served to look at Crown Holdings (CCKAnalyst Report), or Mobile Mini Inc. (MINISnapshot Report).  Both companies carry a Zacks Rank #3 (Hold).

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