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Dec 21, 2018

Greif's (GEF, $34.48) $1.8 Billion Purchase of Caraustar Is Criticized By Analysts Over Leverage Concerns

Greif Inc.’s decision to acquire Caraustar Industries, Inc. for $1.8 billion in cash was met with discouraging outlook from several credit ratings companies and analysts.

On Thursday, Greif, a manufacturer of industrial packaging,  revealed  that it is buying Caraustar from an affiliate of private equity firm H.I.G. Capital. The announcement  led to Moody’s Investors Service considering a downgrade on Greif. Moody's said its review for the downgrade is based on "the significant incremental debt, change in risk profile and the integration risk inherent in the transaction."  Also, BMO Capital Markets lowered Greif's rating from "Outperform" to a "Underperform."

Greif, however, said that the acquisition is expected to boost its earnings, margins and free cash flow, and to create annual cost synergies of at least $45 million within 36 months. According to the company, the addition of Caraustar would increase Greif's U.S. sales to roughly two thirds of total consolidated sales, from about half for fiscal 2018. Caraustar’s leadership in uncoated and coated recycled paperboards would help Greif expand its market, according to Greif.

Related Ticker: GEF

GEF's MACD Histogram just turned positive

The Moving Average Convergence Divergence (MACD) for GEF turned positive on February 29, 2024. Looking at past instances where GEF's MACD turned positive, the stock continued to rise in of 56 cases over the following month. The odds of a continued upward trend are .

Price Prediction Chart

Technical Analysis (Indicators)

Bullish Trend Analysis

The Momentum Indicator moved above the 0 level on March 15, 2024. You may want to consider a long position or call options on GEF as a result. In of 85 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .

GEF moved above its 50-day moving average on March 07, 2024 date and that indicates a change from a downward trend to an upward trend.

The 10-day moving average for GEF crossed bullishly above the 50-day moving average on March 12, 2024. This indicates that the trend has shifted higher and could be considered a buy signal. In of 23 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are .

Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where GEF advanced for three days, in of 317 cases, the price rose further within the following month. The odds of a continued upward trend are .

Bearish Trend Analysis

The RSI Indicator has been in the overbought zone for 2 days. Expect a price pull-back in the near future.

The Stochastic Oscillator demonstrated that the ticker has stayed in the overbought zone for 5 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.

Following a 3-day decline, the stock is projected to fall further. Considering past instances where GEF declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .

GEF broke above its upper Bollinger Band on March 27, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.

Fundamental Analysis (Ratings)

Fear & Greed

The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 81, placing this stock better than average.

The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.

The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (1.988) is normal, around the industry mean (2.756). P/E Ratio (11.858) is within average values for comparable stocks, (26.717). GEF's Projected Growth (PEG Ratio) (0.000) is slightly lower than the industry average of (2.382). Dividend Yield (0.030) settles around the average of (0.035) among similar stocks. P/S Ratio (0.772) is also within normal values, averaging (10.613).

The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating fairly steady price growth. GEF’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.

The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.

Notable companies

The most notable companies in this group are Tupperware Brands Corp (NYSE:TUP).

Industry description

The containers/packing sector includes companies that manufacture containers (like plastic and aluminum food containers, glass bottles, metal cans, cardboard, storage and waste bags, giftwraps etc.) and provide packing services. Food-and-beverage and household products are major markets for this business. Several companies in this industry cater to international markets in addition to serving domestic customers. Consumer spending habits could potentially affect this industry’s performance. Some products, that use oil-based materials as inputs, are likely to see their costs of production get impacted (to some extent) by energy price movements. The ever-expanding e-commerce market has only supercharged the amount/frequency of goods shipped domestically and across borders, thereby creating ample potential opportunities for containers and packaging businesses. Ball Corporation, International Paper Company, Amcor Plc and Packaging Corporation of America are some of the largest U.S. companies in this industry.

Market Cap

The average market capitalization across the Containers/Packaging Industry is 4.33B. The market cap for tickers in the group ranges from 6.74K to 66.8B. STO holds the highest valuation in this group at 66.8B. The lowest valued company is EPTI at 6.74K.

High and low price notable news

The average weekly price growth across all stocks in the Containers/Packaging Industry was 3%. For the same Industry, the average monthly price growth was 8%, and the average quarterly price growth was 10%. MAYX experienced the highest price growth at 67%, while MGIH experienced the biggest fall at -19%.

Volume

The average weekly volume growth across all stocks in the Containers/Packaging Industry was 20%. For the same stocks of the Industry, the average monthly volume growth was 23% and the average quarterly volume growth was 24%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 49
P/E Growth Rating: 56
Price Growth Rating: 48
SMR Rating: 66
Profit Risk Rating: 81
Seasonality Score: 18 (-100 ... +100)
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General Information

a provider of industrial packaging products and services

Industry ContainersPackaging

Profile
Fundamentals
Details
Industry
Containers Or Packaging
Address
425 Winter Road
Phone
+1 740 549-6000
Employees
12000
Web
https://www.greif.com
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