Greif Inc.’s GEF performance continues to bear the impact of weak demand owing to the coronavirus crisis and weak industrial manufacturing environment. High debt levels also remain a concern.
The Zacks Rank #4 (Sell) company — with a market capitalization of $1.8 billion — is a leading global producer of industrial packaging products and services with manufacturing facilities located in over 40 countries. Shares the company have lost 2.9% against the industry’s growth of 2.8% in a year’s time. Meanwhile, the S&P 500 Index has rallied 12.8% in the same time frame.
Factors Hurting the Stock
Greif expects fourth-quarter fiscal 2020 earnings to be around 66 cents per share implying a decline of 47% and 22% on a year-over-year and sequential basis, respectively. Profits are anticipated to be lower sequentially in the quarter owing to normal business seasonality, higher SG&A expenses, less opportunistic sourcing cost benefits, reduced sales in the high margin filling business in the United States and a sequentially higher tax rate in the fourth quarter.
Greif expects adjusted earnings per share in fiscal 2020 between $3.00 and $3.20. The mid-point of the guidance indicates a slump of 22% from the prior year. The company anticipates global macroeconomic conditions to remain volatile throughout the remainder of the fiscal year on account of the ongoing pandemic.
The company continues to face challenging industrial markets across its portfolio and the overall demand environment remains soft. It is witnessing sluggish demand within the textile, industrial paints, coatings and lubricant industries owing to the pandemic. Around 60% of the Rigid Industrial Packaging & Services segment’s revenues are generated from steel drums. The ongoing volume declines in steel drums will continue to hinder the segment’s results.
The company’s total debt to total capital ratio is at 0.69 higher than the industry’s 0.60.