KeyBanc Reiterates a 'Buy' on Greif, Inc (GEF); Favorite Name in Industrial Packaging

September 3, 2009 8:25 AM EDT

KeyBanc reiterates a 'Buy' on Greif, Inc (NYSE: GEF), price target $60.

KeyBanc analyst says, "Last night, Greif, Inc. (GEF-NYSE) reported 3Q09 EPS of $0.88, at the midpoint of our estimate of $0.90 and the First Call mean of $0.86. Performance in the quarter was mixed, but importantly, the pace of volume improvement accelerated in July and cost savings of at least $150 million for 2009 are ahead of expectations, which leads us to believe our 2010 estimate of $4.15 remains reasonable (with potential for upside if underlying volumes continue trending higher). In 3Q09 results, there were some puts and takes, with the positives: gradual volume improvement and a more balanced performance among the geographies in the industrial segment; and the negatives: a decline in paper segment earnings as the Containerboard-OCC spread narrowed and a lower quality of earnings (more timberland gains, lower interest expense, lower tax rate vs. our estimates). FY09 guidance was narrowed to a range of $3.25-$3.50 from $3.25-$3.75, but we believe an equal or greater reduction was anticipated by investors, given consensus EPS estimates of $3.30. 4Q09 implied EPS are in a range of about $1.45-$1.70, which reflects a steep ramp in cost savings, which should carry over into 2010 (up to $70 million-$80 million). Accordingly, we continue to believe something in the neighborhood of our $4.15 EPS estimate for 2010 is achievable without any real improvement in underlying volumes. Despite mixed results in the quarter, we believe investors will interpret the commentary and outlook favorably and GEF remains our favorite name in industrial packaging."

To see more analyst ratings on GEF Click Here.

Greif, Inc. engages in the manufacture and sale of industrial packaging products, and containerboard and corrugated products worldwide.

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