Graphic Packaging Holding (GPK)

Consumer packaging solutions provider Graphic Packaging Holding (NYSE:GPK) reported revenue ahead of Wall Streets expectations in Q3 CY2025, but sales fell by 1.2% year on year to $2.19 billion. On the other hand, the company’s full-year revenue guidance of $8.5 billion at the midpoint came in 0.6% below analysts’ estimates. Its non-GAAP profit of $0.58 per share was 3.2% above analysts’ consensus estimates.

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 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.

Competitors in the paper and packaging industry include WestRock (NYSE:WRK, International Paper (NYSE:IP), and Packaging Corporation of America (NYSE:PKG)

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Graphic Packaging Holding’s sales grew at a mediocre 6% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a rough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Graphic Packaging Holding’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 5.1% annually.

This quarter, Graphic Packaging Holding’s revenue fell by 1.2% year on year to $2.19 billion but beat Wall Street’s estimates by 1.3%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below the sector average.

Graphic Packaging Holding has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 19.9% gross margin over the last five years. That means Graphic Packaging Holding paid its suppliers a lot of money ($80.14 for every $100 in revenue) to run its business.

Graphic Packaging Holding produced a 19.8% gross profit margin in Q3, down 2.8 percentage points year on year. Graphic Packaging Holding’s full-year margin has also been trending down over the past 12 months, decreasing by 2.1 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

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 10.2%. 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 3.6 percentage points over the last five years, as its sales growth gave it operating leverage. Its expansion was impressive, especially when considering most Industrial Packaging peers saw their margins plummet.

In Q3, Graphic Packaging Holding generated an operating margin profit margin of 10.7%, down 1.9 percentage points year on year. Since Graphic Packaging Holding’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Graphic Packaging Holding’s EPS grew at a spectacular 14.7% compounded annual growth rate over the last five years, higher than its 6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Graphic Packaging Holding’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Graphic Packaging Holding’s operating margin declined this quarter but expanded by 3.6 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes 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 declines of 12.8% mark a reversal from its (seemingly) healthy five-year trend. We hope Graphic Packaging Holding can return to earnings growth in the future.

In Q3, Graphic Packaging Holding reported adjusted EPS of $0.58, down from $0.64 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 3.2%. Over the next 12 months, Wall Street expects Graphic Packaging Holding’s full-year EPS of $2.10 to shrink by 2.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Graphic Packaging Holding broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders. The divergence from its good operating margin stems from its capital-intensive business model, which requires Graphic Packaging Holding to make large cash investments in working capital and capital expenditures.

Taking a step back, we can see that Graphic Packaging Holding’s margin dropped by 4.8 percentage points during that time. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the trend continues, it could signal it’s becoming a more capital-intensive business.

Graphic Packaging Holding burned through $40 million of cash in Q3, equivalent to a negative 1.8% margin. The company’s cash burn slowed from $118 million of lost cash in the same quarter last year.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Graphic Packaging Holding historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.7%, somewhat low compared to the best industrials companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Graphic Packaging Holding’s ROIC averaged 3.6 percentage point increases each year. This is a good sign, and we hope the company can continue improving.

Graphic Packaging Holding reported $120 million of cash and $5.92 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.55 billion of EBITDA over the last 12 months, we view Graphic Packaging Holding’s 3.7× net-debt-to-EBITDA ratio as safe. We also see its $210 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Graphic Packaging Holding narrowly top analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its full-year EBITDA guidance missed and its full-year revenue guidance fell slightly short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 4.2% to $14.99 immediately following the results.

Updated: December 3, 2025 at 11:06 PM EST

Before making an investment decision, investors should account for Graphic Packaging Holding’s business fundamentals and valuation in addition to what happened in the latest quarter.

Graphic Packaging Holding doesn’t pass our quality test. First off, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its spectacular EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its projected EPS for the next year is lacking. On top of that, its unit sales declined.

Graphic Packaging Holding’s P/E ratio based on the next 12 months is 8.8x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $19.89 on the company (compared to the current share price of $16.27).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.