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Will Greif Benefit From its Strategic Transformation Plan?

On Sep 11, we issued an updated research report on leading global producer of industrial packaging products, Greif, Inc.GEF .

Greif's third-quarter fiscal 2015 (ended Jul 31, 2015) adjusted earnings per share increased 3% year over year to 60 cents, beating the Zacks Consensus Estimate of 41 cents by a wide margin which indicates a positive earnings surprise of 46.34%.

Greif expects fiscal 2015 revenues to be lower year over year due to persistent currency volatility, weak global manufacturing environment, continued deflationary raw material costs as well as a stronger dollar. Despite expectation of lower revenues, Greif will continue to benefit from the execution of its transformation initiatives, including its SG&A cost reduction actions. This has prompted the company to increase its earnings guidance for fiscal 2015 to a range of $1.85-$1.95 from the previous guidance of $1.65-$1.75.

In the fourth quarter, however, expected accrual of professional fees related to the SG&A reduction efforts and increased medical expense related to experience trends throughout the year will offset the benefits from these cost reduction actions.

Greif has been progressing with its strategic transformation plan that will allow it to better align resources with customers' needs, improve returns on invested capital and better reward its shareholders. The company has sold its non-core assets and operations that are no longer in line with its business portfolio. So far in fiscal 2015, Greif completed eight divestitures - six in the Rigid Industrial Packaging & Services segment and two in Flexible Products. This will address capacity issues and also enable the company to benefit from previous productivity and operational excellence achievements. Greif also continues to accelerate its headcount reductions, and slash entertainment and travel budget by one-third by increasing video conferencing usage and eliminating all non-sales related travel. These actions will be accretive to earnings.

Moreover, Greif is moving forward with its growth initiatives. The company has completed two important expansions. The modernization of the Riverville Mill was completed on time as well as under budget. The addition of a second corrugator in North Carolina has also been completed on time and under budget. This project will add an incremental 55,000 ton of annual container work capacity at Riverville, bringing Greif's pro-forma capacity to approximately 780,000 tons. Further, Greif's global intermediate bulk container expansion has now reached 12 existing production lines, which are capable of producing around 1.8 million units.

These positive factors have sent Greif's estimates northward with the Zacks Consensus Estimate moving up 12% to $1.92 and 6% to $2.38 for fiscal 2015 for fiscal 2016, respectively.

Grief currently holds a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other stocks in the packaging space worth considering are AptarGroup, Inc. ATR , Sealed Air Corporation SEE and UFP Technologies, Inc. UFPT . While AptarGroup and Sealed Air sport a Zacks Rank #1 (Strong Buy), UFP Technologies carries a Zacks Rank #2 (Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SEALED AIR CORP (SEE): Free Stock Analysis Report

APTARGROUP INC (ATR): Free Stock Analysis Report

UFP TECH INC (UFPT): Free Stock Analysis Report

GREIF INC (GEF): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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