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Why Shares of Graphic Packaging Holding Company Slumped Today

By Timothy Green - Oct 23, 2018 at 1:00PM

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An across-the-board earnings miss sent shares lower.

What happened

Shares of Graphic Packaging Holding Company ( GPK 1.00% ) tumbled on Tuesday after the packaging solutions provider came up short of analyst expectations when it reported its third-quarter results. The stock was down about 10% at 11:55 a.m. EDT.

So what

Graphic Packaging reported third-quarter revenue of $1.53 billion, up 34.5% year over year but $50 million below the average analyst estimate. The bulk of this revenue growth came from solid-bleached-sulfate (SBS) mill and food-service assets stemming from a partnership with International Paper that was announced late last year. A small amount of growth was driven by higher pricing, while changes in currency exchange rates acted as a small headwind.

A slumping chart.

Image source: Getty Images.

CEO Michael Doss said: "Pricing improved during the quarter reflecting the benefits of recent pricing initiatives. Importantly, we successfully implemented a second open-market price increase this year for our CUK and SBS paperboard during the quarter."

Non-GAAP earnings per share came in at $0.22, up from $0.18 in the prior-year period but $0.02 lower than analysts were expecting. The company managed this profit boost despite increased costs for freight, chemicals, wood, purchased external paper, and pulp substituted recycled fiber.

Now what

With Graphic Packaging missing analyst estimates and citing broad-based cost inflation, investors may be concerned that the bottom line won't hold up going forward. The stock is now down nearly 30% year to date, a rout that could worsen if earnings start moving in the wrong direction in the next few quarters.

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