On Wednesday, Seaport Global Securities maintained its Buy rating on Graphic Packaging (NYSE:GPK) Holding Company (NYSE:GPK) stock with a steady price target of $32.00.
The firm addressed recent challenges faced by the company, including severe weather in July and an electrical substation damage in August, which impacted three of its facilities. These incidents are expected to reduce the company's adjusted EBITDA by approximately $20-25 million in the third quarter of 2024.
As a consequence of these events, Graphic Packaging (NYSE:PKG) now anticipates its full-year 2024 results to be below the midpoint of its previously issued guidance of $1.73 billion to $1.83 billion in adjusted EBITDA and $2.65 to $2.85 in adjusted EPS. Seaport Global had already considered the initial guidance ambitious, with their estimate being around $30 million below the midpoint.
Despite the setbacks, Seaport Global is only adjusting its third-quarter EBITDA estimate down by $10 million, leaving fourth-quarter estimates untouched. This decision is based on the company's report that all affected facilities have returned to normal operations without impacting customer service levels. Additionally, there are no changes to the 2025 adjusted EBITDA estimate of $1.8 billion, which is expected to show a modest year-over-year increase when considering the Augusta divestment.
Seaport Global highlights several factors supporting their Buy rating, including Graphic Packaging's competitive advantage through investment and innovation, expected improvement in key market volumes, potential positive outcomes from market shifts, and the prospect of substantial shareholder returns as capital expenditures decrease.
The firm also notes the stock's reasonable valuation based on current performance and potential for future growth, particularly as the company's investments, such as the $1 billion Waco project, start to generate increased free cash flow in 2025, setting the stage for significant EBITDA growth in the following years.
InvestingPro Insights
Graphic Packaging Holding Company (NYSE:GPK) is currently trading near its 52-week high, with a market capitalization of $8.8 billion, reflecting investor confidence. According to recent InvestingPro data, the company has a P/E ratio of 12.47, which is adjusted to 11.87 for the last twelve months as of Q2 2024. This valuation metric suggests that investors are recognizing the company's earnings potential despite a slight revenue decline of 5.93% over the same period.
InvestingPro Tips indicate that Graphic Packaging's management has been actively repurchasing shares, signaling confidence in the company's value and future prospects. Additionally, the company's high shareholder yield is a testament to its commitment to returning value to its investors. However, it's worth noting that four analysts have revised their earnings estimates downwards for the upcoming period, which could be a point for potential investors to consider. For those interested in a deeper analysis, there are additional InvestingPro Tips available, providing more nuanced insights into the company's financial health and market position.
The company's stock has been characterized by low price volatility, which may appeal to investors seeking stability in their portfolio. Furthermore, analysts predict that Graphic Packaging will remain profitable this year, supported by a strong return over the last five years. With the next earnings date slated for October 29, 2024, investors will be keenly watching for the company's performance updates and future outlook.
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