Back to top

Analyst Blog

Packaging Corporation of America (PKG - Snapshot Report), the fourth largest containerboard and corrugated packaging manufacturer in the U.S., reported stellar second quarter 2013 results with record sales and earnings. Net income for the reported quarter was $64.5 million or 66 cents per share versus $45.2 million or 46 cents per share in the year-earlier quarter.

Excluding a one-time charge of $5 million related to annuity plans, recurring earnings for the reported quarter were $69.5 million or 71 cents per share compared with $47.7 million or 49 cents in the year-ago quarter. The recurring earnings were well ahead of the Zacks Consensus Estimate of 63 cents.

The year-over-year rise in earnings was primarily attributable to higher demand for corrugated and containerboard products during the quarter, which also helped the company to raise their prices. While high product prices contributed 27 cents per share to the reported earnings, higher sales volume contributed 5 cents to the tally, partially offset by higher energy costs and annual mill maintenance outages.  

Revenues

Net sales for the reported quarter soared to a record high of $800.2 million compared with $712.5 million in the year-ago period, representing a year-over-year increase of 12.3%. Net sales for first quarter 2013 exceeded the Zacks Consensus Estimate of $775 million.

Corrugated products’ shipments increased 5.2% per workday in the reported quarter, while total shipments increased 6.8% year over year with one more workday. The production of containerboard was down 9,000 tons year over year to 629,000 tons due to annual mill maintenance downtime. Total containerboard inventories decreased 12,000 tons on a sequential basis.

Balance Sheet

Packaging Corporation generated $187 million cash from operations with capital expenditures of $54 million. The company hiked its dividend by 28% year over year to $1.60 per share on an annualized basis. Packaging Corporation ended the quarter with $370 million in cash with long-term debt of $786 million.

Outlook

Management was impressed with the stupendous results achieved during the quarter, driven by a record production, higher sales volume and high product prices. In addition, better-than-expected demand for corrugated products was successfully met by efficient start-ups and record productivity.

With higher corrugated products prices, higher sales volume and no planned annual outages, Packaging Corporation expects increased containerboard production and lower operating costs on a sequential basis in third quarter 2013. At the same time, Packaging Corporation expects higher purchased electricity costs and a relatively higher tax rate. Consequently, the company anticipates third quarter earnings to be approximately 88 cents per share.

Packaging Corporation currently has a Zacks Rank #3 (Hold). Other companies in the industry that are worth mentioning include Resolute Forest Products Inc. (RFP - Snapshot Report), Orchids Paper Products Company (TIS - Snapshot Report) and Rock-Tenn Company (RKT - Analyst Report), each carrying a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.