AKAnomics Case Study: GPK Revenue Nowcast

AKAnomics Case Study: GPK Revenue Nowcast 

Historical data suggests AKAnomics Nowcasting revenue estimates have a hit rate of 60-80% for being on the right side of consensus. So we are happy to see a hit rate of 77% for 2024Q1among the 22 companies (among 108 companies we track) we highlighted for revenue beat/miss. The ability to highlight potential disconnects from consensus comes from our ability to track granular global macro/industry data as soon as it is made available, and translate that into implications for each company based on its business exposure to different global industries (our Nowcasting process). The ability to highlight potential disconnects is directly valuable to both discretionary, and systematic hedge funds in their positioning.

Navigating data-driven methodologies can be challenging, and even further so for our “quantamental” approach that merges fundamental assessment of each company with the relevant industry data, but we are happy to share our approach through a case study. We spotlight one of our estimates from 2024Q1  - Graphic Packaging Holding Company (GPK) - where our revenue estimate came in very close to company reports, confirming the large miss relative to consensus. 

Company Overview: Graphic Packaging Holding Company (GPK) 

Graphic Packaging Holding Company designs, produces, and sells consumer packaging products primarily made from renewable or recycled materials. Serving brands in the food, beverage, foodservice, household, and other consumer product markets, GPK operates in a multinational environment, with over 70% of its business rooted in North America.

2024Q1 Revenue Surprise Analysis 

After three consecutive quarters of year-over-year organic growth decline and a 2023Q4 revenue growth of -5.7%, GPK's management guided to a notable improvement in 2024Q1 of 3-4% from the prior quarter, while consensus pegged it at -2.2%. As 2024Q1 progressed, while our Nowcasting process did observe improvements in growth of relevant global industries that GPK is exposed to, we estimated it to be far less than both consensus and company guidance, and the company’s revenue growth of -7.3% did surprise to the downside as our process had outlined.  Furthermore, while we believe that it is important to flag beats/miss, it is even more important to do so early, before consensus moves. In GPK’s case, our first estimate for the quarter on 2/20/2024 had already called out for a -3.7% revenue surprise which steadily declined as more data rolled in throughout the quarter.

Combining accuracy and timing can be a significant alpha generating prospect for savvy investors looking to capitalize on informational asymmetries. 

What gave us conviction? 

GPK has the largest exposure to North America and Europe, and within that to food and beverage industry, in addition to the packaging industry. So, our approach is to follow these industries closely with global macro/industry data, and through historical data confirm that these relevant industry data have explanatory power. In 2024Q1, the data suggested deterioration in pricing growth for packaging industry, along with little change in growth for North America and Europe food and beverage manufacturing and sales. For pricing, we use the different pricing data available around the world – primarily producer price index and import and export prices. For food and beverage industry data, we use the likes of industrial production, import/export, wholesaler sales, orders, and retail sales data. For 2024Q1, our indexes for North America Food Manufacturing, Europe Food and Beverage Sales, and Paperboard Packaging combinedly suggested a further deterioration in organic growth from 2023Q4 as seen below. 

This case exemplifies how macroeconomic and alternative data, when systematically analyzed and combined into predictive nowcasts, can provide a substantial informational edge to buy-side portfolio managers. By leveraging these data sources, we offer unparalleled insights that enhance decision-making processes and investment outcomes. 

Partner with Us for Unmatched Investment Insights 

Our success with GPK is just one example of how our nowcasting solutions can transform your investment strategies. For more information about our nowcasting solutions and how they can benefit your investment strategies, please reach out to us.