We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Packaging Corporation (PKG) Downgraded to Sell: Find Out Why
Read MoreHide Full Article
On Jun 28, Zacks Investment Research downgraded Packaging Corporation of America (PKG - Free Report) to a Zacks Rank #4 (Sell). Going by the Zacks model, companies holding a Zacks Rank #4 or #5 are likely to underperform the broader market.
Why the Downgrade?
Packaging Corporation projects second-quarter 2017 earnings to be roughly $1.45 per share. The company guided that mill maintenance outage costs will likely flare up in the second quarter as it has scheduled outages at its three largest containerboard mills.
The company currently estimates the total property damage and business interruption losses in the next quarter to be between $20 million and $25 million related to the DeRidder mill insurance claim. Packaging Corporation will claim these losses, subject to a $5-million deductible, under its property damage and business interruption insurance policy.
Packaging Corporation of America Price and Consensus
Further, Packaging Corporation projects elevated freight costs, persistent price inflation on recycled fiber, energy and certain chemicals, and seasonally colder weather that will elevate wood and energy costs. These, in turn, are expected to hurt earnings in the second quarter.
Notably, Packaging Corporation operates in a highly competitive industry. Intensity in competition could lead to a decline in the company’s market share as well as lower sales prices, both of which are likely to adversely affect the bottom line and operating cash flows.
Despite these hurdles, the company’s share price outperformed the Zacks categorized Containers-Paper/Plastic sector over the last 12 months, led by acquisitions and its diverse product portfolio. The current rate of return for the industry is 23.6%, while that of Packaging Corporation is 73.7%.
However, Packaging Corporation is overvalued compared to its sub industry. Its trailing 12-month price earnings (P/E) ratio is 21.9, whereas the Zacks categorized sub-industry's average trailing 12-month P/E ratio is lower at 20.47.
AGCO has an average positive earnings surprise of 40.39% for the trailing four quarters. Altra Industrial Motion generated an average positive earnings surprise of 15.93% in the past four quarters. AptarGroup delivered an average positive earnings surprise of 1.78% over the last four quarters.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Packaging Corporation (PKG) Downgraded to Sell: Find Out Why
On Jun 28, Zacks Investment Research downgraded Packaging Corporation of America (PKG - Free Report) to a Zacks Rank #4 (Sell). Going by the Zacks model, companies holding a Zacks Rank #4 or #5 are likely to underperform the broader market.
Why the Downgrade?
Packaging Corporation projects second-quarter 2017 earnings to be roughly $1.45 per share. The company guided that mill maintenance outage costs will likely flare up in the second quarter as it has scheduled outages at its three largest containerboard mills.
The company currently estimates the total property damage and business interruption losses in the next quarter to be between $20 million and $25 million related to the DeRidder mill insurance claim. Packaging Corporation will claim these losses, subject to a $5-million deductible, under its property damage and business interruption insurance policy.
Packaging Corporation of America Price and Consensus
Packaging Corporation of America Price and Consensus | Packaging Corporation of America Quote
Further, Packaging Corporation projects elevated freight costs, persistent price inflation on recycled fiber, energy and certain chemicals, and seasonally colder weather that will elevate wood and energy costs. These, in turn, are expected to hurt earnings in the second quarter.
Notably, Packaging Corporation operates in a highly competitive industry. Intensity in competition could lead to a decline in the company’s market share as well as lower sales prices, both of which are likely to adversely affect the bottom line and operating cash flows.
Despite these hurdles, the company’s share price outperformed the Zacks categorized Containers-Paper/Plastic sector over the last 12 months, led by acquisitions and its diverse product portfolio. The current rate of return for the industry is 23.6%, while that of Packaging Corporation is 73.7%.
However, Packaging Corporation is overvalued compared to its sub industry. Its trailing 12-month price earnings (P/E) ratio is 21.9, whereas the Zacks categorized sub-industry's average trailing 12-month P/E ratio is lower at 20.47.
Key Picks
Better-ranked stocks in the same sector are AGCO Corporation (AGCO - Free Report) , Altra Industrial Motion Corp. and AptarGroup, Inc. (ATR - Free Report) . All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AGCO has an average positive earnings surprise of 40.39% for the trailing four quarters. Altra Industrial Motion generated an average positive earnings surprise of 15.93% in the past four quarters. AptarGroup delivered an average positive earnings surprise of 1.78% over the last four quarters.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation. See Them Free>>