Greif (GEF) Stock Declines 7% in a Month: Factors to Note

Company Performance - Greif's shares have declined by 7% over the past month, while the industry has only seen a 1.5% decline [1] - The company reported a 4% increase in sales for the fiscal second quarter, alongside a return to volume growth [7] - Despite the sales increase, Greif experienced a 54% drop in earnings due to high raw material, transportation, and manufacturing costs, as well as increased SG&A expenses [7][16][17] Revenue and Earnings - Greif's total revenues rose by 4.7% in the fiscal second quarter, driven by a 1.7% increase in Global Industrial Packaging and a 2.2% rise in Paper Packaging Services [3] - The company has faced declining adjusted earnings since the fourth quarter of fiscal 2022, with a notable 19.8% improvement in the first quarter of fiscal 2024 that was not sustained in the second quarter [4][7] - The updated EBITDA guidance for fiscal 2024 is between $675 million and $725 million, reflecting a 14.5% decline from the previous year's adjusted EBITDA of $819 million [12] Market Conditions - Demand in the Paper Packaging and Services segment has remained weak across key end markets, particularly in textiles and paper cores, with volumes declining for seven consecutive quarters [9] - The Global Industrial Packaging segment has also seen negative volume growth for eight consecutive quarters, influenced by the overall contraction in the industrial sector [15] Cost Management - Greif's cost of sales increased by 10.4%, and SG&A expenses surged by 21.9%, attributed to rising raw material and transportation costs, as well as higher compensation expenses [16] - The company is focusing on cost-rationalization measures, operational execution improvements, and capital discipline to mitigate the impact of cost headwinds on margins [19] Future Outlook - Greif's adjusted free cash flow is now expected to be between $175 million and $225 million, down from a previous estimate of around $200 million, compared to $481 million in fiscal 2023 [18] - The Zacks Consensus Estimate for fiscal 2025 indicates a projected 19% year-over-year growth [19]