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On Friday, Citi analyst Anthony Pettinari adjusted the price target for Graphic Packaging Holding Company (NYSE:GPK) to $23.00, down from the previous $23.00, while maintaining a Neutral rating on the stock. This change follows a significant drop in the company’s shares, which fell 15.6% after Graphic Packaging reported first-quarter earnings that missed expectations and reduced its full-year EBITDA guidance by 12% at the midpoint. According to InvestingPro data, the stock’s RSI suggests oversold territory, with analyst targets ranging from $23.00 to $32.90. The company currently appears undervalued based on InvestingPro’s Fair Value analysis.
The company is grappling with a challenging economic environment described as stagflation, which includes flat to negative volume growth forecasts for the fiscal year, ranging from unchanged to a 4% decrease. Graphic Packaging also experienced higher costs than anticipated, with $21 million in input cost inflation during the first quarter—a trend expected to persist throughout the year. Despite these challenges, InvestingPro data shows the company maintains a "GOOD" overall financial health score, with revenue of $8.8 billion in the last twelve months and a solid gross profit margin of 22.5%.
Graphic Packaging noted a decline in its Beverage segment sales, which accounts for 25% of its total sales and marks the first decrease in two years. This is in contrast to other can makers who have reported strong results this quarter. Despite Graphic Packaging’s reputation for having one of the most defensive portfolios in the packaging industry, the company’s revised outlook stands out as most of its peers have reiterated their full-year guidance during this earnings season.
According to Pettinari, the current headwinds may be indicative of broader challenges that other companies in the sector will eventually have to acknowledge. However, the setback in earnings growth for Graphic Packaging raises questions about the feasibility of its long-term goals, specifically the Vision 2030 targets. With the updated estimates, Pettinari has set the new price target at $23 but has chosen to maintain a neutral stance on the stock.
In other recent news, Graphic Packaging Holding Company reported its first-quarter 2025 earnings, revealing an adjusted earnings per share (EPS) of $0.51, which missed analysts’ expectations of $0.59. The company also reported revenue of $2.1 billion, slightly below the anticipated $2.15 billion. Despite the earnings miss, Graphic Packaging announced a new $1.5 billion share repurchase authorization as a strategic move to enhance shareholder value. The company is facing challenges such as weaker volumes and input cost inflation, which have impacted its financial performance.
In terms of future guidance, Graphic Packaging has adjusted its EBITDA expectations to a range of $1.4 to $1.6 billion. The company is also targeting innovation sales growth of at least 2% in 2025. Analyst feedback from firms such as Wells Fargo (NYSE:WFC) and RBC Capital Markets suggests a cautious outlook due to ongoing market pressures. Despite these challenges, Graphic Packaging remains committed to its Vision 2030, focusing on innovation and execution to drive future growth. The company’s strategic positioning and strong cash flow generation are expected to support its long-term objectives.
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