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Greif (GEF) Poised to Grow Despite Hurricane Harvey Impact


On Sep 8, we issued an updated research report on Greif, Inc. GEF — producer of industrial packaging products and services. The company is likely to benefit from its Transformation plan, sale of non-core assets and improving investment. However, the adverse impact of Hurricane Harvey and inflationary raw-material costs remain major headwinds.

Notably, Greif announced its long-term financial targets. The company remains on track to attain its 2017 transformation commitments and is confident about the consistent execution of this strategy. It also anticipates fiscal 2017 results to benefit from the execution of transformation efforts.

The company has been successful in fixing its under-performing businesses, as well as divesting non-core assets and closed facilities, which will drive long-term performance. During the nine-month period ended Jul 31, 2017, Greif completed one divestiture, deconsolidated two non-strategic businesses, and liquidated one non-U.S. non-strategic business. The company completed one material divestiture in the Rigid Industrial Packaging & Services segment during third-quarter fiscal 2017.

In addition, Greif is investing in the new IBC capabilities in Texas. The company is also building a new steel plant in Russia. Further, it is investing in the new triple wall line in Louisville. Its IBC investment in Germany and Jubail steel plant will likely fuel inorganic growth. Moreover, these investments will boost the company’s overall performance going forward.

However, Greif slashed its fiscal 2017 adjusted earnings per share guidance due to the timing of raw material price adjustment mechanisms in customer contracts and headwind impact related to Hurricane Harvey. Further, Greif remains doubtful about achieving its objective of flat operating working capital dollars year-over-year in fiscal 2017 due to the escalating raw material costs.

It should be noted that the company has outperformed the industry in the last year. While shares of the company have gained 19%, the industry has registered 7.5% growth in the same period.

Currently, Greif carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the industrial product space are Caterpillar Inc. CAT, Avery Dennison Corporation AVY and AGCO Corporation AGCO. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Caterpillar has expected long-term earnings growth rate of 9.5%.

Avery Dennison has expected long-term earnings growth rate of 7%.

AGCO has expected long-term earnings growth rate of 13.5%.

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