Consumer packaging solutions provider Graphic Packaging Holding (NYSE:GPK) met Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 6.2% year on year to $2.12 billion. On the other hand, the company’s full-year revenue guidance of $8.35 billion at the midpoint came in 3.7% below analysts’ estimates. Its non-GAAP profit of $0.51 per share was 11.8% below analysts’ consensus estimates.
Revenue: $2.12 billion vs analyst estimates of $2.13 billion (6.2% year-on-year decline, in line)
Adjusted EPS: $0.51 vs analyst expectations of $0.58 (11.8% miss)
Adjusted EBITDA: $387 million vs analyst estimates of $397.5 million (18.3% margin, 2.6% miss)
The company dropped its revenue guidance for the full year to $8.35 billion at the midpoint from $8.8 billion, a 5.1% decrease
Management lowered its full-year Adjusted EPS guidance to $2 at the midpoint, a 24.7% decrease
EBITDA guidance for the full year is $1.5 billion at the midpoint, below analyst estimates of $1.68 billion
Operating Margin: 10.4%, down from 12.3% in the same quarter last year
Free Cash Flow was -$483 million compared to -$328 million in the same quarter last year
Sales Volumes fell 2.6% year on year (-5.2% in the same quarter last year)
Market Capitalization: $7.02 billion
StockStory’s Take
Graphic Packaging Holding faced a challenging Q1, with management citing weak consumer demand and persistent input cost inflation as key drivers behind the quarter’s results. CEO Mike Doss explained that ongoing consumer affordability concerns and lackluster promotional activity from customers failed to produce expected volume improvement. He noted, “Volumes across consumer staples remain uneven and below our expectations,” emphasizing that even innovation-driven sales growth was not enough to offset these pressures.
Looking ahead, the company’s revised guidance reflects a cautious outlook, with lower expectations for both volume and earnings due to continued uncertainty in consumer spending and rising costs. CFO Steve Scherger indicated that price increases should help recover inflation impacts by late this year and into 2026, but he added that meaningful margin recovery would require a stabilization in both consumer volumes and input prices. Management acknowledged the difficulties but reaffirmed confidence in the company’s long-term ability to generate substantial cash flow.
Key Insights from Management’s Remarks
Graphic Packaging’s management attributed the quarter’s performance to external consumer headwinds and input cost inflation, while also highlighting ongoing efficiency measures and innovation efforts.
Consumer demand under pressure: Management reported that stretched consumers, particularly in the U.S., pulled back on purchases of packaged goods, leading to lower volumes in key markets. Food and beverage packaging saw little benefit from increased promotions, and only modest improvements were noted in certain categories like snacks and coffee.
Input cost inflation persists: CFO Steve Scherger detailed that inflation affected multiple input categories—energy, chemicals, and logistics—offsetting efficiency gains and pressuring margins. Management expects these inflationary pressures to continue at least through midyear.
Innovation-driven growth pockets: Despite weak volumes overall, the company achieved $44 million in sales from new product innovation, especially in strength packaging, coffee, snacks, and cleaning products. Management believes these innovation efforts are helping outpace some end markets.
Capacity optimization and mill closures: The company is finalizing its Waco recycled paperboard project and has announced the closure of older facilities, such as the Middletown, Ohio mill, to match capacity with demand and improve cost structure.
New share repurchase authorization: Graphic Packaging’s board approved a new $1.5 billion share repurchase program as part of a broader capital allocation shift, reflecting a transition from heavy investment toward capital returns and ongoing reinvestment in core operations.
Drivers of Future Performance
Management expects continued headwinds from weak consumer demand and input cost inflation to impact near-term results, while new price increases and efficiency initiatives are expected to gradually support margins.
Volume recovery uncertain: The company’s outlook is based on the expectation that volumes will remain pressured as consumers continue to seek value and reduce overall packaged purchases. Management is planning operations around a possible 2% volume decline for the year.
Input cost and pricing dynamics: Persistent inflation in energy, chemicals, and logistics is expected to weigh on profitability until announced price increases take effect late in the year. Management anticipates these actions will offset inflation mostly in 2026.
Waco project and cost savings: The ramp-up of the new Waco facility and related closures of older mills are expected to deliver approximately $160 million in incremental EBITDA over two years, supporting future margin improvement and cash flow expansion.
Top Analyst Questions
Ghansham Panjabi (Baird): Asked whether volume declines are primarily due to affordability issues rather than structural market changes. Management responded that affordability is the main driver and that they are running operations to match real demand.
Arun Viswanathan (RBC Capital Markets): Inquired about the need for further mill downtime or capacity reductions given ongoing weak volumes. CEO Mike Doss confirmed that rolling market downtime is expected and that recent competitor closures should balance market supply.
Matt Roberts (Raymond James): Sought details on input cost inflation categories and the impact of hedging or mill closures. CFO Steve Scherger explained that inflation was broad-based across energy, chemicals, and logistics, with some mitigation from hedges and future facility closures.
Lewis Merrick (BNP Paribas): Questioned whether the current margin pressure is structural or temporary, and the path to regaining 19–21% margins. Management said that inflation is the main temporary factor, with Waco project benefits expected to restore margins.
Gabe Hajde (Wells Fargo Securities): Asked about startup costs for the Waco project and whether the company is waiting for volume improvement before executing share repurchases. Management clarified that share repurchases do not depend on volume recovery and startup costs are included in cash flow planning.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) the pace and impact of newly announced price increases on margins, (2) execution and ramp-up progress of the Waco facility and related mill closures, and (3) trends in consumer packaged goods volumes as promotional activity and private label market share evolve. The effectiveness of cost control initiatives and the company’s ability to generate free cash flow despite macro headwinds will be additional areas of focus.
Graphic Packaging Holding currently trades at a forward P/E ratio of 9.4×. At this valuation, is it a buy or sell post earnings? Find out in our free research report.
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