Goldman Sachs Comments On Graham Packaging Following Earnings Release

Graham Packaging (NYSE: GRM) reported 1Q2011 EPS of $0.30, below Goldman Sach's estimate of $0.36. GRM's sales exceeded its estimate by 6% driven by the pass through of higher resin costs. GRM's results show its ability to pass through resin costs in relative real time as cost of goods sold was higher by the essentially the same amount that sales exceeded Goldman's expectations. GRM reported EBITDA of $135.2 mn in 1Q2011 essentially inline with Goldman's $136.6 mn estimate; EBITDA margins were lower by 120bps as a result of the pass through of resin in sales and cost of goods sold. GRM reiterated its 2011 EBITDA outlook of $583 mn.

Goldman makes no changes to its 2011-2013 EPS estimates as slightly lower 1Q2011 results are offset by benefits of Fx. It rates GRM shares Neutral as it sees 6% upside to the price target relative to 10% for other specialty packaging stocks in the coverage. On 4/13/2011, Silgan (NASDAQ: SLGN) announced that it will acquire GRM; the deal is expected to close in 3Q2011.

Goldman Sachs has a $24 PT and Neutral rating on GRM

GRM closed Thursday at $22.66