Greif (GEF): A Strategic Buy Ahead of June Earnings with Undervalued Potential and Dividend Power

Investors seeking a compelling blend of undervalued equity, dividend stability, and growth potential should turn their attention to Greif, Inc. (GEF). With its stock trading at $56.05—a staggering 30.8% below its estimated fair value of $80.50—and a June 4 earnings report poised to catalyze a rebound, GEF presents a rare opportunity to capitalize on both near-term catalysts and long-term fundamentals.

Valuation: A Discounted Growth Story

Greif's current P/E ratio of 12.6x is well below its 5-year average of 19.5x and out of sync with its growth trajectory. While the company's trailing earnings have faced headwinds from margin compression and debt, its forward P/E of 12.63 and PEG ratio of 1.02 signal a valuation that's already priced in near-term challenges. A PEG ratio under 1.5 often indicates stocks poised for above-average growth relative to their price—a key reason to prioritize GEF before its June earnings.

The EPS Beat Catalyst: Why June 4 Matters

Analysts project Q2 2025 EPS of $1.19, but GEF's track record of revenue outperformance (it beat Q1 estimates by $10M in revenue) hints at upside. The company's restructuring—closing underperforming plants, divesting non-core timberland, and achieving $13M in annualized cost savings—should begin to show results. A beat on EPS would likely ignite a re-rating, especially given the 8.5% price target increase to $80.50 from analysts like Wells Fargo and BofA.

Dividend: A 4% Yield Anchored by Stability

With a 3.9% dividend yield (vs. the S&P 500's 1.3%), GEF offers income seekers a rare combination: a payout ratio of 48% (comfortably covered by earnings) and a history of annual hikes. Even after Q1's net income dip, Greif maintained its dividend, signaling confidence in cash flow resilience. Investors collecting $2.16 annually per share get a 4.02% yield at current prices—a compelling hedge against market volatility.

Addressing Debt: Strategic Moves to Reduce Risk

Critics point to Greif's $2.84B debt pile and a leverage ratio of 3.63x as red flags. However, the company is actively mitigating these risks:
1. Asset Sales: Plans to divest 176,000 acres of timberland could reduce net debt by $200-300M.
2. Cost Optimization: $13M in annual savings from plant closures and restructuring are already materializing.
3. Free Cash Flow Turnaround: While Q1's free cash flow was negative, Greif's 2025 guidance targets $245M, up from $221M in 2024.

The Contrarian Case: Buying the Dip

Despite Q1's EPS miss (which was partly due to a one-time tax benefit in 2024), Greif's Adjusted EBITDA grew 5.9% to $145.1M, a sign of operational strength. With the S&P 500's packaging industry lagging (-7.5% YTD), Greif's undervaluation relative to its peers creates a buying opportunity.

Risks & Why They're Manageable

• Debt Sustainability: While elevated, the timberland sales and cost cuts should lower leverage to <3.0x by 2026.
• Margin Pressures: Input cost inflation is a headwind, but GEF's 27% EPS growth forecast for 2026 assumes a recovery in pricing power.

Final Analysis: Act Before June 4

Greif's 30.8% discount to fair value, 4% dividend yield, and upcoming earnings catalyst create a compelling “buy the dip” scenario. Even conservative estimates suggest a 43% upside to the $80.50 price target. For investors willing to overlook short-term debt concerns, GEF offers a rare mix of valuation safety, income, and growth.

Bottom Line: The June 4 earnings report is a pivotal moment. If Greif delivers an EPS beat—or even clarity on cost savings and debt reduction—the stock could surge to its $80.50 target. With a PEG ratio under 1.5 and a dividend that outperforms the market, now is the time to position ahead of the catalyst.

Investors should conduct their own due diligence and consider their risk tolerance before making investment decisions.