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Packaging Corporation of America (PKG - Free Report) reported fourth-quarter 2016 adjusted earnings of $1.23 per share, a 13.9% year-over-year increase driven primarily by higher containerboard and corrugated products volume, higher white paper prices and mix.
Including one-time items, earnings came in at $1.17 per share compared with $1.07 per share in the year-ago quarter.
Operational Update
Net sales for the quarter were $1,477 million, up from $1,390.9 million in the year-ago quarter, and beat the Zacks Consensus Estimate of $1,437 million.
Packaging Corporation of America Price, Consensus and EPS Surprise
Cost of products sold increased 3.9% year over year to $1,149.5 million in the quarter. Gross profit increased 14.7% to $327 million from $285 million in the prior-year quarter. Gross margin expanded 150 basis points (bps) to 22% in the quarter. Selling, general and administrative expenses increased 19% to $125 million from $105 million in the year-ago quarter. Operating income rose 9.7% year over year to $192.9 million.
Segmental Performance
Packaging: Sales from this segment increased to $1,196.9 million from $1,091.4 million in the prior-year period. Segment EBITDA, excluding special items, was $259.2 million in the reported quarter compared with $252 million in the prior-year quarter. Containerboard production was 962,000 tons, while containerboard inventory as flat compared to year-end 2015 levels. Corrugated products shipments were up 9.7% year over year.
Printing Papers: Sales from this segment were $253.8 million in the reported quarter versus $272.8 million in the year-earlier quarter. Segment EBITDA, excluding special items, for the fourth quarter jumped to $50 million from $28.2 million a year ago. Paper volume was low compared to fourth-quarter 2015, primarily due to the previously announced fourth-quarter shutdown of market pulp operations at the Wallula Mill. The figure was also down sequentially, compared to the seasonally stronger third-quarter 2016.
Liquidity
At the end of 2016, the company had cash balance of $239.3 million compared to $184.2 million. Capital expenditures during the year were $274.3 million, compared to $314.5 million in the year-ago quarter.
2016 Performance
Packaging Corporation reported adjusted earnings per share of $4.88 in 2016, up 7.7% from $4.53 per share recorded in the prior year. Earnings outpaced the Zacks Consensus Estimate of $4.82 per share. Including one-time items, the bottom line came in at $4.75, up 6.3% from $4.47 recorded in 2015.
Revenues inched up 0.6% year over year to $5,779 million from $5,741.7 billion in 2015. The top line also beat the Zacks Consensus Estimate of $5,735 million.
Moving Forward
Packaging Corporation anticipates first-quarter 2017 earnings of $1.26 per share. The company expects to realize the majority of previously announced packaging segment price increases. It also estimates higher corrugated products shipments during first-quarter 2017. However, the company’s performance will be hurt by lower containerboard and paper production volume.
Further, it expects higher freight costs as well as higher labor and benefit costs, with annual wage raises and other timing-related expenses. Moreover, sustained price inflation of recycled fiber, energy and certain chemicals, along with the seasonally colder weather, will flare up wood and energy costs. These, in turn, are likely to impact earnings.
Share Price Performance
In the last one year, Packaging Corporation has outperformed the Zacks classified Containers-Paper/Plastic sub-industry with respect to price performance. The stock gained 80%, while the industry rose 32.3% over the same time frame.
Zacks Rank & Key Picks
Packaging Corporation currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same sector are ABB Ltd , Altra Industrial Motion Corp. and Apogee Enterprises, Inc. (APOG - Free Report) .
Altra Industrial Motion also boasts a Zacks Rank #1 and has delivered an average positive earnings surprise of 8.06% for the trailing four quarters. Apogee, another Zacks Rank #1 stock, has an average positive earnings surprise of 13.24% for the past four quarters.
Zacks' Top 10 Stocks for 2017
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Packaging Corporation (PKG) Q4 Earnings Top, Sales Rise
Packaging Corporation of America (PKG - Free Report) reported fourth-quarter 2016 adjusted earnings of $1.23 per share, a 13.9% year-over-year increase driven primarily by higher containerboard and corrugated products volume, higher white paper prices and mix.
Including one-time items, earnings came in at $1.17 per share compared with $1.07 per share in the year-ago quarter.
Operational Update
Net sales for the quarter were $1,477 million, up from $1,390.9 million in the year-ago quarter, and beat the Zacks Consensus Estimate of $1,437 million.
Packaging Corporation of America Price, Consensus and EPS Surprise
Packaging Corporation of America Price, Consensus and EPS Surprise | Packaging Corporation of America Quote
Cost of products sold increased 3.9% year over year to $1,149.5 million in the quarter. Gross profit increased 14.7% to $327 million from $285 million in the prior-year quarter. Gross margin expanded 150 basis points (bps) to 22% in the quarter. Selling, general and administrative expenses increased 19% to $125 million from $105 million in the year-ago quarter. Operating income rose 9.7% year over year to $192.9 million.
Segmental Performance
Packaging: Sales from this segment increased to $1,196.9 million from $1,091.4 million in the prior-year period. Segment EBITDA, excluding special items, was $259.2 million in the reported quarter compared with $252 million in the prior-year quarter. Containerboard production was 962,000 tons, while containerboard inventory as flat compared to year-end 2015 levels. Corrugated products shipments were up 9.7% year over year.
Printing Papers: Sales from this segment were $253.8 million in the reported quarter versus $272.8 million in the year-earlier quarter. Segment EBITDA, excluding special items, for the fourth quarter jumped to $50 million from $28.2 million a year ago. Paper volume was low compared to fourth-quarter 2015, primarily due to the previously announced fourth-quarter shutdown of market pulp operations at the Wallula Mill. The figure was also down sequentially, compared to the seasonally stronger third-quarter 2016.
Liquidity
At the end of 2016, the company had cash balance of $239.3 million compared to $184.2 million. Capital expenditures during the year were $274.3 million, compared to $314.5 million in the year-ago quarter.
2016 Performance
Packaging Corporation reported adjusted earnings per share of $4.88 in 2016, up 7.7% from $4.53 per share recorded in the prior year. Earnings outpaced the Zacks Consensus Estimate of $4.82 per share. Including one-time items, the bottom line came in at $4.75, up 6.3% from $4.47 recorded in 2015.
Revenues inched up 0.6% year over year to $5,779 million from $5,741.7 billion in 2015. The top line also beat the Zacks Consensus Estimate of $5,735 million.
Moving Forward
Packaging Corporation anticipates first-quarter 2017 earnings of $1.26 per share. The company expects to realize the majority of previously announced packaging segment price increases. It also estimates higher corrugated products shipments during first-quarter 2017. However, the company’s performance will be hurt by lower containerboard and paper production volume.
Further, it expects higher freight costs as well as higher labor and benefit costs, with annual wage raises and other timing-related expenses. Moreover, sustained price inflation of recycled fiber, energy and certain chemicals, along with the seasonally colder weather, will flare up wood and energy costs. These, in turn, are likely to impact earnings.
Share Price Performance
In the last one year, Packaging Corporation has outperformed the Zacks classified Containers-Paper/Plastic sub-industry with respect to price performance. The stock gained 80%, while the industry rose 32.3% over the same time frame.
Zacks Rank & Key Picks
Packaging Corporation currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same sector are ABB Ltd , Altra Industrial Motion Corp. and Apogee Enterprises, Inc. (APOG - Free Report) .
ABB Ltd has delivered an average positive earnings surprise of 23.50% in the last four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Altra Industrial Motion also boasts a Zacks Rank #1 and has delivered an average positive earnings surprise of 8.06% for the trailing four quarters. Apogee, another Zacks Rank #1 stock, has an average positive earnings surprise of 13.24% for the past four quarters.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>