Global Urbanization And Automation Will Drive Sustainable Packaging Expansion

Key Takeaways

• Strategic structural shifts in high-growth markets and superior cost optimization position Greif for enhanced margin expansion, above-industry volume growth, and compounding earnings power.
  
• Leadership in sustainability, supply chain resiliency, and technology investments secures pricing power, market share, and strong, sustainable cash flow growth.
  
• Shifting demand, regulatory pressures, and exposure to cyclical sectors threaten Greif's traditional business model, margins, and ability to compete or innovate sustainably.

Catalysts

Engages in the production and sale of industrial packaging products and services worldwide.

• Analyst consensus highlights the $100 million cost optimization as margin accretive, but given the accelerated progress, the deployment of over 70 optimization work streams, and demonstrated execution, Greif is positioned to substantially outperform consensus expectations on both net margin expansion and EBITDA growth, potentially achieving targets ahead of schedule and elevating long-term earnings power.
  
• While consensus views volume recovery in high-growth end markets as mainly cyclical, Greif's strategic focus on GDP-plus markets such as agrochemicals, pharma, and food and beverage-already delivering above-industry volume growth and greater pricing power-signals that structural, not just cyclical, revenue acceleration is likely, putting sustained double-digit revenue and EBITDA growth within reach as global industrial demand normalizes.
  
• Greif's industry-leading commitment to sustainability and circular packaging, proven by 16 consecutive years of sustainability reporting and new customer wins like the USPS, uniquely positions the company to secure outsized share of environmentally driven contracts as global regulation tightens, which will increase both top-line growth and gross margins.
  
• The company's highly localized global supply chain network and agile manufacturing footprint-across 250+ facilities and 40 countries-not only insulates Greif from trade-related shocks and tariffs, but also enables it to command premium pricing and protect market share as customers prioritize supply chain resilience, supporting revenue stability and stronger free cash flow generation.
  
• Long-term investments in automation, advanced manufacturing, and integrated supply chain systems through the Greif Business System are expected to further accelerate productivity improvements and SG&A leverage, enabling EBITDA margins to surpass historical peaks and driving sustainable, compounding growth in free cash flow per share.

Greif Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Greif compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Greif's revenue will grow by 4.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.9% today to 6.0% in 3 years time.
• The bullish analysts expect earnings to reach $374.1 million (and earnings per share of $6.09) by about August 2028, up from $213.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 15.0x on those 2028 earnings, which is the same as it is today today. This future PE is lower than the current PE for the US Packaging industry at 22.1x.
• Analysts expect the number of shares outstanding to grow by 0.6% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.96%, as per the Simply Wall St company report.

Greif Future Earnings Per Share Growth

Risks

• An accelerating global trend toward flexible and fiber-based packaging, along with rising regulation on the recyclability and carbon footprint of packaging, threatens the long-term demand for Greif's traditional rigid containers (such as steel and polymer drums), which could shrink revenues as core product lines face secular decline.
  
• Despite stated progress in sustainability and annual reporting, Greif's ability to keep pace with leading ESG requirements, particularly increasing recycled content and reducing emissions, is not detailed in depth, putting future sales and margins at risk as key customers and investors migrate toward greener supply chains.
  
• The company's heavy exposure to cyclical industrial and commodity sectors such as chemicals, oils, and agriculture is highlighted by recent volume declines in metals and large polymer drums, indicating significant vulnerability in revenues and earnings during economic downturns or prolonged sector weakness.
  
• Greif's high capital intensity, evidenced by ongoing facility closures, aging manufacturing infrastructure, and reliance on cost-out programs, suggests ongoing pressure on free cash flow, with the need for reinvestment potentially reducing available capital for innovation or shareholder returns.
  
• Increasing competition from lower-cost packaging producers, especially in Asia, combined with margin pressures from rising input costs and potential mandatory product redesigns for regulatory compliance, could erode Greif's net margins and restrict its ability to maintain or grow earnings over the long term.

Valuation

• The assumed bullish price target for Greif is $93.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Greif's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $93.0, and the most bearish reporting a price target of just $68.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $6.2 billion, earnings will come to $374.1 million, and it would be trading on a PE ratio of 15.0x, assuming you use a discount rate of 8.0%.
• Given the current share price of $67.36, the bullish analyst price target of $93.0 is 27.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.