While it’s not a high-profile stock, Graphic Packaging Holdings (GPK +12.24%) was very much a popular one on the second trading day of the week. Encouraged by a double beat the company scored with its first-quarter results, market players snapped up its shares to propel them to a more than 12% gain on Tuesday.
A time of change
For the period, Graphic Packaging’s net sales were just under $2.16 billion, slightly more than the $2.12 billion sales in the same quarter last year. The change was more dramatic in net income not under generally accepted accounting principles (GAAP), which eroded to $28 million ($0.09 per share) from the year-ago profit of $154 million.
Image source: Getty Images.
Despite the steep bottom-line drop, the highly specialized industrial company beat the average analyst estimate for non-GAAP (adjusted) Profitability, which was $0.06 per share. It also exceeded the prognosticator consensus of $2.06 billion for net sales.
The very positive investor reaction was driven more by management’s presentation of the results of its recent 90-day business review than by those beats. It said it’s effectively fulfilling its promise to reduce costs by $60 million while cutting its workforce by 500. Among other measures, it also canceled certain “low-return” projects and streamlined its asset portfolio.
Today’s Change
(12.24%) $1.17
Current Price
$10.73
Key Data Points
Market Cap
$2.8B
Day’s Range
$9.81 – $10.92
52wk Range
$8.79 – $23.76
Volume
17M
Avg Vol
7.1M
Gross Margin
18.74%
Dividend Yield
4.60%
Forward into the future
Despite those changes, Graphic Packaging reaffirmed its capital spending projection for this year at $450 million. This, however, is considerably below the $922 million in 2025.
It also reaffirmed its existing guidance for full-year net sales and profitability. Its top line should hit $8.4 billion to $8.6 billion, filtering down into adjusted earnings per share (EPS) of $0.75 to $1.15.
It’s never pleasant to hear of personnel dismissals and downsizing, but if they make Graphic Packaging leaner, more focused, and financially stronger, they could have a net positive effect. I would be a “wait-and-see” on this one, awaiting indications on exactly how the recent moves affect performance.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
