While it's not a high-profile stock, Graphic Packaging Holdings (GPK 3.27%) 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.
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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.
NYSE: GPK
Key Data Points
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.
