Growth & Income: Greif (GEF)

Last month, Greif, Inc. (GEF) reported strong fiscal second-quarter results. The company had year-over-year sales growth of 29% and EPS growth of 62%.

Additionally, management increased its EPS guidance for fiscal year 2010. Analysts followed suit and increased their EPS estimates for fiscal 2010 and fiscal 2011.

Growth and Income

The company is expected to grow its earnings per share 27% in fiscal 2010, 19% in fiscal 2011, and 10% over the long term. The stock also offers investors a dividend yield of 3.0%.

This Zacks #2 Rank stock trades at 13.6x fiscal 2010 consensus EPS estimates and 11.4x fiscal 2011 consensus EPS estimates.

Business

Greif, Inc. manufactures and sells industrial packaging products, and containerboard and corrugated products worldwide. It operates in three segments: Industrial Packaging, Paper Packaging, and Land Management.

Fiscal Second-Quarter Results

On June 2, Grief announced net sales of $836.6 million, up 29% from the second quarter of 2009. The company’s strong growth was due to higher sales volumes and foreign currency translation, partially offset by lower selling prices.

The company earned $0.86 per share, beating the Zacks Consensus Estimate by 5 cents, or 6.2%. In the last five quarters, the company has beaten the Zacks Consensus Estimate by an average of 3.9%.

Chairman and CEO Michael Gasser said, “Sales volumes significantly improved across all our businesses and geographic regions compared to the same quarter last year, including strong emerging market growth. Consolidated gross profit margin expansion was led by improvements in the Rigid Industrial Packaging and Services segment. However, lower selling prices and higher raw material costs caused gross profit margin compression in the Paper Packaging segment.”

Guidance

Management continues to anticipate a gradual improvement in sales volumes and full realization of the fiscal 2009 permanent cost reductions. In addition, Paper Packaging is expected to recover from its first half margin contraction with the full implementation of previously announced containerboard price increases. The company raised its earnings guidance for fiscal year 2010 to $4.05-$4.30.

Estimates

In the last two months, the Zacks Consensus Estimate for fiscal 2010 is higher by 11 cents, or 2.7%, to $4.21 and the Zacks Consensus Estimate for fiscal 2011 is up 8 cents, or 1.6%, $5.01.

The Chart

GEF shares have traded in a fairly wide range for the last year. The stock hit the lower end of that range in February. In the last four months, GEF has trended higher with a series of higher highs and higher lows. Currently, the stock is just $3.50, or 6% below its 52-week high.

GREIF BROS-CL A (GEF): Free Stock Analysis Report
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