Consumer packaging solutions provider Graphic Packaging Holding (NYSE:GPK) fell short of the market’s revenue expectations in Q4 CY2024, with sales falling 6.8% year on year to $2.10 billion. The company’s full-year revenue guidance of $8.8 billion at the midpoint came in 1.5% below analysts’ estimates. Its non-GAAP profit of $0.59 per share was 6.2% below analysts’ consensus estimates.
Revenue: $2.10 billion vs analyst estimates of $2.15 billion (6.8% year-on-year decline, 2.6% miss)
Adjusted EPS: $0.59 vs analyst expectations of $0.63 (6.2% miss)
Adjusted EBITDA: $404 million vs analyst estimates of $416.7 million (19.3% margin, 3.1% miss)
Management’s revenue guidance for the upcoming financial year 2025 is $8.8 billion at the midpoint, missing analyst estimates by 1.5% and implying -0.1% growth (vs -6.6% in FY2024)
Adjusted EPS guidance for the upcoming financial year 2025 is $2.66 at the midpoint, missing analyst estimates by 1.3%
EBITDA guidance for the upcoming financial year 2025 is $1.73 billion at the midpoint, below analyst estimates of $1.75 billion
Operating Margin: 11.4%, down from 12.9% in the same quarter last year
Free Cash Flow Margin: 9%, similar to the same quarter last year
Market Capitalization: $8.17 billion
Michael Doss, the Company's President and CEO said, "In 2024, we demonstrated the value of the Graphic Packaging business model, generating a level of consistency and profitability in line with other leading consumer packaging companies. We delivered strong and steady margins and significant new consumer packaging innovations. Our strategic investments in capabilities, innovation, and competitive advantage have positioned the company for long-term value creation. In 2025, we will build on that success, driving competitive advantage in recycled paperboard across all of North America, and expanding our innovation capabilities into new markets and new product categories around the world.
Company Overview
Founded in 1991, Graphic Packaging (NYSE:GPK) is a provider of paper-based packaging solutions for a wide range of products.
Industrial Packaging
Industrial packaging companies have built competitive advantages from economies of scale that lead to advantaged purchasing and capital investments that are difficult and expensive to replicate. Recently, eco-friendly packaging and conservation are driving customers preferences and innovation. For example, plastic is not as desirable a material as it once was. Despite being integral to consumer goods ranging from beer to toothpaste to laundry detergent, these companies are still at the whim of the macro, especially consumer health and consumer willingness to spend.
Sales Growth
A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Graphic Packaging Holding’s 7.4% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the industrials sector and is a tough starting point for our analysis.
Graphic Packaging Holding Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Graphic Packaging Holding’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 3.4% annually. Graphic Packaging Holding isn’t alone in its struggles as the Industrial Packaging industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.
This quarter, Graphic Packaging Holding missed Wall Street’s estimates and reported a rather uninspiring 6.8% year-on-year revenue decline, generating $2.10 billion of revenue.
Looking ahead, sell-side analysts expect revenue to grow 1.1% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.
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Adjusted Operating Margin
Graphic Packaging Holding has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 10%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Analyzing the trend in its profitability, Graphic Packaging Holding’s operating margin rose by 4.7 percentage points over the last five years, showing its efficiency has improved.
This quarter, Graphic Packaging Holding generated an operating profit margin of 11.4%, down 1.5 percentage points year on year. Since Graphic Packaging Holding’s operating margin decreased more than its gross margin, we can assume it was recently less efficient because expenses such as marketing, R&D, and administrative overhead increased.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Graphic Packaging Holding’s EPS grew at an astounding 23.4% compounded annual growth rate over the last five years, higher than its 7.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
We can take a deeper look into Graphic Packaging Holding’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Graphic Packaging Holding’s operating margin declined this quarter but expanded by 4.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Graphic Packaging Holding, its two-year annual EPS growth of 3.2% was lower than its five-year trend. We hope its growth can accelerate in the future.
In Q4, Graphic Packaging Holding reported EPS at $0.59, down from $0.75 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Graphic Packaging Holding’s full-year EPS of $2.48 to grow 7.5%.
Key Takeaways from Graphic Packaging Holding’s Q4 Results
We struggled to find many resounding positives in these results. Its revenue missed significantly and its EPS fell short of Wall Street’s estimates. Full-year guidance also largely came in below expectations. Overall, this was a weaker quarter. The stock remained flat at $27.22 immediately following the results.
The latest quarter from Graphic Packaging Holding’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
