S&P 500   4,594.62
DOW   34,899.34
QQQ   391.20
S&P 500   4,594.62
DOW   34,899.34
QQQ   391.20
S&P 500   4,594.62
DOW   34,899.34
QQQ   391.20
S&P 500   4,594.62
DOW   34,899.34
QQQ   391.20

High Demand A Good Problem For Packaging Corporation Of America 

Tuesday, October 26, 2021 | Thomas Hughes
High Demand A Good Problem For Packaging Corporation Of America 

Packaging Corporation Of American Widens Margins 

Packaging Corporation of America (NYSE: PKG) is not immune to the effects of the global supply chain disruptions but it is navigating the environment well. The company reported significant hurdles to revenue and earnings in the form of freight availability and cost, labor costs, and input costs but was able to more than make up the difference. The good news is that, while price increases share some of the credit, the company’s work to expand production to meet demand is as much to blame for the success. Management says record volume and mix contributed to the pricing increases enough to improve margins by several hundred basis points. 

Packaging Corporation of America Results Beat On All Metrics 

Packaging Corporation of America had a great quarter and one, that if it was impeded by the pandemic, shows little signs of the headwinds facing American businesses today. The company reported a little more than $2.0 billion in net revenue good for a gain of 18.3% over last year. The revenue was driven by strength in the containerboard segments (read eCommerce) and offset by weakness in the paper segment. More importantly, revenue is up 14.25% over the 2019 time frame and beat the Marketbeat.com consensus by 360 basis points, no small feat in today’s environment. 

Moving down to the margins, pricing actions and mix contributed to a 520 basis point improvement in gross margin and a 530 basis point improvement in operating margin. This left GAAP earnings at $2.63 or $0.30 ahead of the consensus and nearly $0.70 better than last year. At the adjusted level, earnings of $2.69 are even better. Adjusted earnings are up more than 70% YOY and beat the consensus by $0.35 and should continue to remain strong over the next few quarters. The company is forecasting not only a strong pricing environment but high demand as well. As for guidance, the company is expecting $2.04 in adjusted EPS versus the Marketbeat.com consensus of $2.07. 

“Looking ahead as we move from the third and into the fourth quarter, we will continue to implement our previously announced price increases for domestic containerboard, corrugated packaging, and paper, and we also expect average export containerboard prices to move higher,” says CEO Mark W. Kowlzan. 

Packaging Corporation Of America Could Be Raising The Dividend 

Packaging Corporation of America pays a safe and possibly growing 2.99% yield while trading at a discount to the broad market. The stock is trading about 16X its earnings consensus, a consensus that is too low, with upside risk in the guidance and a strong balance sheet to boot. The company is paying out about 50% of earnings with ample free cash flow and a history of dividend increases as well. The company’s last increase was exactly four quarters ago so it looks like one could be coming any day. Based on our assessment of the numbers, the next increase could be worth 10% or more. 

The Technical Outlook: Range-Bound PKG Could Move Lower 

Shares of Packaging Corporation of America have been range-bound over the past few months and could remain so in the near term at least. Price action moved up in the wake of the earnings report but is struggling with resistance in early trading. If price action can not follow through on the early gains we see it languishing near the recent lows until another catalyst emerges. If price action fails to maintain support at this level a move down to $128 or even $120 is very possible. 

High Demand A Good Problem For Packaging Corporation Of America 

Should you invest $1,000 in Packaging Co. of America right now?

Before you consider Packaging Co. of America, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Packaging Co. of America wasn't on the list.

While Packaging Co. of America currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The 5 Stocks Here

 


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Packaging Co. of America (PKG)2.6$133.57+1.1%2.99%17.02Hold$141.56
Compare These Stocks  Add These Stocks to My Watchlist 

Resources

Premium Research Tools

MarketBeat All Access subscribers can access stock screeners, the Idea Engine, data export tools, research reports, and other premium tools.

Discover All Access

Market Data and Calendars

Looking for new stock ideas? Want to see which stocks are moving? View our full suite of financial calendars and market data tables, all for free.

View Market Data

Investing Education and Resources

Receive a free world-class investing education from MarketBeat. Learn about financial terms, types of investments, trading strategies and more.

Financial Terms
Details Here
MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau

© American Consumer News, LLC dba MarketBeat® 2010-2021. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information

© 2021 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research.