Graphic Packaging Holding Co (GPK) has been rated "Neutral" by Citi, with a revised price target of $28, down from $30, reflecting concerns over volume recovery and competitive pressures. The report highlights that GPK's 4Q results and 2025 EBITDA guidance fell short of expectations, with volumes growing only 1% and a slower-than-anticipated recovery. Citi notes, "Volumes remain the key question for 2025," as GPK aims for a 1-3% volume growth driven by innovation, despite a 1% decline in 2024.
The investment thesis is centered around several risks, including price/cost dynamics, competitive pressures from foreign entrants, and the uncertain timeline for organic volume recovery. Additionally, GPK's limited capital return in 2025, as it completes its Waco, TX greenfield project, adds to the cautious outlook. The company faces challenges in its key end markets, which remain weak and have seen minimal uplift from promotions.
Citi's valuation is based on an 8.0x EV/EBITDA multiple, closer to GPK's long-term average, resulting in an enterprise value of approximately $13.6 billion. Adjustments for net debt and other factors lead to an equity value of around $8.6 billion, supporting the $28 target price.
As of February 5, GPK's stock was trading at $26.64, up 0.38% from the previous close.