Yahoo Finance Graphic Packaging (GPK) Scales 52-Week High: More Room to Run?
Shares of Graphic Packaging Holding Company GPK scaled a new 52-week high of $26.70 on Jun 8, before closing the session a tad lower at $26.45.
GPK has a market capitalization of $8.1 billion and sports a Zacks Rank #1 (Strong Buy), currently.
Over the past year, the company has risen 23.3% against the industry's 5.9% decline. The Industrial Products sector and the S&P 500 composite have gained 11.6% and 9.6%, respectively, in the same time frame.
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Solid Q1 Results
Graphic Packaging’s shares have gained 11.8% since it reported solid first-quarter fiscal 2023 (ended on Mar 31, 2023) results. Adjusted earnings per share of 77 cents surpassed the Zacks Consensus Estimate of 62 cents and also improved 60% year over year.
The company generated revenues of around $2,438 million in the quarter, up 9% from the year-ago quarter, aided by higher pricing. The top line also beat the consensus estimate of $2,387 million.
Upbeat Guidance
Backed by the better-than-expected first quarter 2023 performance, the company raised its adjusted EBITDA guidance to a range of between $1.8 billion and $2.0 billion from the prior stated range of $1.7 billion to $1.9 billion. The midpoint of the new range indicates year-over-year growth of 19%. Net sales are expected to be approximately $10 billion, indicating 6% growth from $9.44 billion of sales in 2022.
Adjusted cash flow is expected to be between $600 million and $800 million, compared with $700 million in 2022. The company expects the net leverage ratio at 2023-end to be at or below 2.5x adjusted EBITDA. Adjusted earnings per share (excluding amortization of purchased intangibles) are now expected to be between $2.70 and $3.10. GPK had reported adjusted earnings per share of $2.33 in 2022.
Solid Demand to Boost Revenues
GPK’s focus on innovation in fiber-based consumer packaging solutions has been boosting demand and drove a third consecutive year of net organic sales growth in 2022. The company reported organic growth of 1% in the first quarter of 2023. Its diversified portfolio (food & beverage 56%; consumer 20%, foodservice 20%, health & beauty 4%) is also benefiting results.
Consumer preference has been for more sustainable packaging and Graphic Packaging is making investments to bring innovative packaging solutions to meet the demand.
The company’s plans to optimize its paperboard network over the next three years will further its position as the lowest-cost, highest-quality paperboard producer in North America and enhance its ability to meet the growing global demand for fiber-based consumer packaging.
Investments to Reap Benefits
GPK’s state-of-the-art CRB machine in Kalamazoo, MI has outperformed expectations in terms of quality, yield and financials. It contributed $40 million in EBITDA during the first quarter of 2023 and EBITDA expectations for the year have been raised to $80 million. The machine is on track to achieve an expected $130 million in incremental, annual EBITDA in two years, which is a year ahead of schedule. The company now expects 550K tons of annual production, compared with the 500K tons stated earlier. The company has also started construction on another state-of-the-art mill in Waco, TX to further advance its leadership in fiber-based consumer packaging.
Upward Estimate Revisions
Earnings estimates for Graphic Packaging have also moved up over the past 60 days. The Zacks Consensus Estimate for 2023 and 2024 bottom lines have increased 10% and 8%, respectively. The favorable estimate revisions instill investors’ confidence in the stock.
Other Key Picks
Some other top-ranked stocks from the Industrial Products sector are Hubbell Incorporated HUBB, The Manitowoc Company, Inc. MTW and Pentair plc PNR. HUBB and MTW sport a Zacks Rank #1 at present, and PNR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hubbell has an average trailing four-quarter earnings surprise of 21%. The Zacks Consensus Estimate for HUBB’s fiscal 2023 earnings is pegged at $13.81 per share. The consensus estimate for 2023 earnings has moved 22.5% north in the past 60 days. Its shares have gained 45.4% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. MTW’s shares have gained 18.6% in the last year.
The Zacks Consensus Estimate for Pentair’s 2023 earnings per share is pegged at $3.66, up 3% in the past 60 days. It has a trailing four-quarter average earnings surprise of 7.2%. PNR gained 14.9% in the last year.
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