This carton maker handily beat earnings estimates for the previous quarter, and projections for next quarter are rising.
Graphic Packaging (GPK)
from Upside
The largest maker of folding cartons in North America, Graphic Packaging’s (GPK) growing client list includes Kraft Foods, Anheuser-Busch, and Coca-Cola. Increased productivity at the
company’s low-cost paper mills should boost margins and drive profits.
In addition, two recent moves should help sustain growth. On May 27, Graphic Packaging completed the $165 million acquisition of Benson Group, a leading maker of packaging products for the food and health-care industries. Based in the U.K., Benson generates about $200 million in annual sales.
On June 30, Graphic Packaging sold a noncore bag business for roughly $105 million. In the June quarter, per-share profits jumped 54% to $0.20, topping the consensus of $0.17. Revenue rose 2.8%, reflecting improved pricing and favorable product mix. Shares rallied on the results amid speculation that paper companies might consider converting to master limited partnerships, which would trim taxes and boost earnings.
For 2014, consensus estimates project a 35% increase in per-share earnings to $0.70. For 2015, per-share earnings are expected to reach $0.80, up 14%.
Graphic Packaging is being initiated as a Buy.
Richard J. Moroney, CFA, Upside, www.upsidestocks.com, 800-233-5922, August 4, 2014