Greif stock rating downgraded to Neutral by BofA as containerboard exit looms

Investing.com - BofA Securities downgraded Greif Inc. (NYSE:GEF) from Buy to Neutral on Wednesday, while raising its price target to $77.00 from $71.00. The stock, currently trading at $68.21, appears slightly overvalued according to InvestingPro’s Fair Value analysis.

The downgrade comes as Greif approaches a significant transition with the planned divestiture of its containerboard operations, which BofA Securities indicates will be approximately 20% dilutive before the company reinvests the proceeds.

BofA Securities noted that Greif shares had already approached their previous price target of $71, even as the paperboard outlook on pricing was improving.

The research firm had expected uncoated recycled board pricing to increase, a positive factor for Greif’s business that appears to be materializing.

BofA Securities indicated it would maintain the Neutral rating until there is "greater clarity" on Greif’s returns following both the containerboard divestiture and subsequent reinvestment of the proceeds.

In other recent news, Greif Inc. reported its second-quarter fiscal 2025 earnings, with an adjusted earnings per share (EPS) of $1.22, surpassing analysts’ expectations of $1.12. Despite a slight revenue miss, the company raised its fiscal 2025 guidance, projecting adjusted EBITDA to be at least $725 million. Greif also announced the divestiture of its containerboard businesses, Greif Containerboard Solutions, LLC and Box-Board Holding Corporation, which aligns with its "Build to Last" strategy. Packaging (NYSE:PKG) Corporation of America will acquire these businesses for $1.8 billion in cash, a deal expected to close by the end of PCA’s third quarter. Truist Securities raised Greif’s stock price target to $72 from $56, maintaining a Hold rating, following the company’s strong performance. The divestiture is expected to unlock immediate value for Greif’s shareholders, according to CEO Ole Rosgaard. Additionally, Greif’s divisions, such as Customized Polymer Solutions and Integrated Solutions, outperformed expectations, contributing to the positive outlook. The company’s ongoing Soterra timberland sales process is also progressing favorably.

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