Citi cuts Graphic Packaging stock target to $28, keeps neutral stance

On Wednesday, Citi analyst Anthony Pettinari adjusted the price target for Graphic Packaging Holding Company (NYSE:GPK), reducing it to $28 from the previous $30, while maintaining a Neutral rating on the stock. Currently trading at $26.8, InvestingPro analysis suggests the stock is undervalued, with analyst targets ranging from $27 to $36.8. Pettinari’s assessment follows Graphic Packaging’s underperformance linked to modest fourth-quarter results and the 2025 EBITDA guidance, which fell short of consensus expectations.

Graphic Packaging’s fourth-quarter volume growth of 1% was at the lower end of forecasts, and the anticipated recovery is progressing slower than initially anticipated. Despite the slow growth, the company projects a return to 1-3% volume growth in 2025, driven by a 2% increase from innovation. This outlook comes after a 1% decline in volumes for 2024. With revenue of $8.8 billion and a P/E ratio of 12.6, InvestingPro data reveals the company maintains strong profitability metrics and generally trades with low price volatility.

The analyst remains cautious about the company’s volume growth prospects but notes that the price and cost dynamics are largely stable. Additionally, the expected capital expenditures for 2025 are lower than anticipated, at approximately $700 million or 8% of sales, with a further decrease to 5% projected for 2026. Graphic Packaging also has minimal exposure to tariffs, with around $300 million in cross-border trade with Canada and Mexico.

Pettinari has revised the forecast for the company’s 2025 EBITDA to $1.705 billion, which is a slight year-over-year increase of $33 million from the current EBITDA of $1.659 billion. This adjustment takes into account contributions from volume/mix/innovation, stable price/cost, and performance improvements, which are expected to offset the negative impacts of labor and benefits costs, foreign exchange fluctuations, and mergers and acquisitions. The target multiple has been lowered to 8.0 times the next twelve months’ EBITDA, aligning more closely with the company’s long-term average of approximately 7.5 times. InvestingPro subscribers can access additional insights, including 6 key ProTips and a comprehensive Pro Research Report analyzing the company’s financial health, which is rated as GOOD with a score of 2.97.

In other recent news, Graphic Packaging Holding Company reported its Q4 earnings and revenue that fell short of analyst expectations. The company’s adjusted earnings per share for Q4 were $0.46, missing the analyst consensus of $0.62 by $0.16. Revenue was reported at $2.1 billion, below the anticipated $2.16 billion. For the full year 2024, the packaging company achieved an adjusted EBITDA margin of 19.1% and reported innovation sales growth of $205 million.

In addition, Graphic Packaging provided guidance for fiscal year 2025, expecting earnings per share between $2.53 and $2.78, and revenue in the range of $8.7 billion to $8.9 billion. Both these estimates fall slightly below the analyst consensus. The company also highlighted its strategic initiatives, including the launch of Vision 2030 and a Virtual Power Purchase Agreement to increase renewable energy use in Europe.

Lastly, Graphic Packaging reported repurchasing 2% of common shares outstanding and returning $322 million of capital to stockholders in 2024, underscoring its commitment to shareholder returns. These are among the recent developments for the company.

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