Will Greif's (GEF) Earnings Disappoint Again in Q4? - Analyst Blog

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Greif Inc. ( GEF ) is scheduled to report its fourth-quarter and 2014 results on Thursday, Jan 14, after market closes.

In the third quarter, Greif's adjusted earnings slumped 51% year over year to 41 cents per share, impacted by actions consistent with its strategy of addressing capacity utilization issues in the flexible product segment. The company delivered a negative earnings surprise of 45.24% in the quarter. Greif has fallen short of the Zacks Consensus Estimate in 3 of the last 4 quarters, with an average negative earnings surprise of 15.19%.

Will Greif miss earnings estimates in this quarter as well? Let's see how things have shaped up.

Factors Influencing Fourth-Quarter Results

For the fourth quarter of 2014, Greif projected net sales to decline 4% year over year to around $1,082 million. Net sales before the effect of acquisitions, divestitures and currency fluctuations for the quarter is expected to remain flat with the year-ago period. Additionally, operating profit is expected to come in at $93 million and operating profit before special items at $118 million in the quarter.

The company expects to record a non-cash impairment charge due to impairment indicators that occurred in the fourth quarter, which will be a significant portion of the goodwill and intangible assets associated with its Flexible Products & Services segment as of Oct 31, 2014.

Greif's continual strategic investments and anticipated gradual recovery in global economic conditions are expected to result in moderate sales and volume improvement. The company will also benefit from the sale of non-core assets and restructuring actions. However, foreign exchange volatility remains a headwind.

Earnings Whispers

Our proven model does not conclusively show that Greif is likely to beat the Zacks Consensus Estimate in the fourth quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for Greif is 0.00%. This is because the Most Accurate estimate of 77 cents is in line with the Zacks Consensus Estimate.

Zacks Rank: Greif's Zacks Rank #4 (Sell) lowers the predictive power of ESP. We caution investors against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement.

Stocks That Warrant a Look

Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Berry Plastics Group, Inc. ( BERY ) has an earnings ESP of +3.85% and carries a Zacks Rank #3. It is expected to report results on Jan 30.

Owens-Illinois ( OI ) has an earnings ESP of +2.17% and carries a Zacks Rank #3. It is scheduled to report results on Feb 2.

W.W. Grainger ( GWW ) has an earnings ESP of +0.71% and a Zacks Rank #3. It is slated to report results on Jan 26.

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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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